US Senator Backs Out of Controversial Cryptocurrency Legislation

Summary

• Senator Roger Marshall has withdrawn his support for the Digital Asset Anti-Money Laundering Act (DAAMLA).
• The DAAMLA bill aims to bring the cryptocurrency sector under current anti-money laundering regulations.
• The bill has been criticized by cryptocurrency advocates and former government officials.
• Senator Elizabeth Warren, who co-sponsored the bill, is seeking reelection in 2024.
• The bill classifies various cryptographic service providers as financial institutions subject to compliance with the Bank Secrecy Act.

In a surprising turn of events, Republican Senator Roger Marshall has withdrawn his support for the Digital Asset Anti-Money Laundering Act (DAAMLA), a bill he co-sponsored with Democratic Senator Elizabeth Warren in 2022.

This move, recorded on July 24, 2024, marks a significant shift in the political landscape surrounding cryptocurrency regulation in the United States.

The DAAMLA billreintroduced in the Senate in July 2023, it seeks to bring the cryptocurrency sector into compliance with existing anti-money laundering and counter-terrorism financing regulatory frameworks.

It proposes to classify a broad range of crypto service providers, including decentralized wallet providers, validators, and miners, as financial institutions. This classification would subject them to the terms of the Bank Secrecy Act.

Senator Warren, who is up for reelection in 2024 to represent Massachusetts, has been a vocal critic of the cryptocurrency industry. When she introduced the bill, she said cryptocurrencies were being used by “rogue nations, oligarchs, drug lords, and human traffickers” to launder money.

However, the bill has faced significant criticism from many quarters. Cryptocurrency organizations argue that it exaggerates the role of cryptocurrencies in financing terrorism and illicit activities.

They warn that the proposed law could have serious repercussions on the US cryptocurrency sector.

In February 2024, the Chamber of Digital Commerce, a U.S.-based cryptocurrency advocacy group, urged the Senate Banking Committee not to consider the DAAMLA bill.

They argued that it could “wipe out hundreds of billions of dollars in value for U.S. startups and decimate the savings of countless Americans” who had legally invested in cryptocurrencies.

Adding to concerns, a group of 80 former U.S. government military and national security officials wrote a letter warning lawmakers against supporting the bill.

They speculated that the legislation could push much of the digital asset industry offshore, potentially hindering law enforcement and raising national security concerns.

Despite this criticism, the bill still has the support of 18 senators from both parties. It directs the Financial Crimes Enforcement Network to issue regulations for reporting significant holdings of foreign digital assets and seeks to establish compliance measures for financial institutions to mitigate the risks associated with anonymity-enhancing technologies.

Senator Marshall’s withdrawal as a co-sponsor is particularly noteworthy given his previous stance on cryptocurrencies. He has been outspoken in his criticism of the asset class, labeling it a “threat to national security.”

In April, Marshall and Warren jointly raised concerns about the role of stablecoin issuer Tether in potentially aiding attempts to evade U.S. sanctions.

The reasons behind Marshall’s change of heart remain unclear, as his office has yet to comment on the decision.

This development adds another layer of complexity to the ongoing debate over cryptocurrency regulation in the United States, highlighting the shifting nature of political positions on this issue.

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