Senators Warren and Marshall Propose Applying the BSA AML/CFT Regime to Crypto

Senator Elizabeth Warren (D-MA) and Senator Roger Marshall (R-KS) introduced the Digital Asset Anti-Money Laundering Act, which would, among other things, expand the scope of BSA regulations to subject digital assets to the AML/CFT framework governing financial institutions.

The bill would require FinCEN to categorize digital asset wallet providers, miners, validators and other network participants that facilitate digital asset transactions as money service businesses, which are required to implement an AML/CFT compliance program pursuant to the BSA. The bill would also instruct FinCEN to finalize its 2020 proposed rulemaking that would require banks and money business services to keep records on customer and counterparty identities, as well as transactions involving certain digital assets that use unhosted wallets or wallets hosted in a non-BSA-compliant jurisdiction. Financial institutions would also be prohibited from using virtual currency mixers and other anonymity-enhancing technologies in any capacity. Additionally, the bill would require individuals engaged in offshore digital asset transactions with a value greater than $10,000 to file a Report of Foreign Bank and Financial Accounts with the IRS.

In response to the proposal, Coin Center, a nonprofit focused on policy issues facing crypto, called the bill a "direct attack on the personal freedom and privacy of cryptocurrency users and developers[,]" and said that it fails to address any of the corporate control issues that led to the collapse of FTX. Coin Center argued that the bill is unconstitutional and that, if anything it would "endanger rather than protect consumers who are interested in owning or using cryptocurrencies by forbidding them from having agency and control over their own assets."