U.S. Senators have introduced a bill that would have a direct impact on the categorization and regulation of bitcoin miners, wallets and nodes.
U.S. Senators have introduced a bill that would have a direct impact on the categorization and regulation of bitcoin miners, wallets and nodes.
Senators Elizabeth Warren (D-Mass) and Senator Roger Marshall (R-Kan) have introduced the “Digital Asset Anti-Money Laundering Act Of 2022,” a bill which would have sweeping impacts on the privacy of bitcoin users.
If enacted, the bill would require custodial and self-custodial wallet providers and miners to implement know-your-customer (KYC) systems. It would also prohibit financial institutions from interacting with privacy tools such as CoinJoin in an effort to limit the ability of users to maintain their privacy. While the bill focuses on such measures in order to curb money laundering, tools such as CoinJoin simply restore the users’ ability to use bitcoin in a way that more closely resembles physical cash. That is, the bank knows when a client withdraws cash at an ATM, but has limited knowledge of what any user does with it afterwards. This cash-like attribute is only realized in cryptocurrencies through tools such as CoinJoins. In addition to this, regulating bodies would be allowed to file reports and surveil users without need for a warrant or government request.
According to the bill, it also calls for a “rule classifying custodial and unhosted wallet providers, cryptocurrency miners, validators, or other nodes who may act to validate or secure third-party transactions, independent network participants, including MEV searchers, and other validators with control over network protocols as money service businesses,” which would imply that Bitcoin nodes would be classified as such as well.
The bill seeks for the Financial Crimes Enforcement Network (FinCEN) to implement the guidance which, according to blockchain advocacy group CoinCenter, “is the most direct attack on the personal freedom and privacy of cryptocurrency users and developers we’ve yet seen.”
Senator Elizabeth Warren has previously expressed her desire to regulate the cryptocurrency industry, most recently after the collapse of FTX. The bill would likely face extensive scrutiny as, amongst many other issues, it would force unhosted wallets providers to register before publishing their products, effectively placing limits on free speech, as code has been proven to be free speech.
