U.S. Senators Elizabeth Warren and Roger Marshall are introducing the Digital Asset Anti-Money Laundering Act (the "Act"), with the aim of bringing the crypto and digital asset ecosystem under existing anti-money laundering and know-your-customer ("KYC") rules. Warren, a vocal crypto critic, said: “Senator Marshall and I introduced a bipartisan bill today that requires crypto to follow the same money-laundering rules as every bank, every broker and Western Union all have to follow today.”
The Act would direct the Financial Crimes Enforcement Network ("FinCEN") to promulgate a rule classifying custodial and self custody wallet providers, cryptocurrency miners, validators, independent network participants, and similar crypto infrastructure providers and users as "money service businesses" ("MSBs"). This would, among other things, require these entities to identify their customers and users and track their transactions. Currently, unhosted wallets, miners and validators are not considered MSBs. FinCEN proposed a similar rule in 2020, which was never implemented.
The Act also takes aim at privacy coins and "mixers" used to "conceal or obfuscate the origin, destination, and counterparties of digital asset transactions." Under the Act, "financial institutions" would be prohibited from "handling, using, or transacting business" with anonymity-enhancing crypto technologies and with digital assets that have interacted with such technologies.
Operators of digital asset ATMs - referred to in the Act as "kiosks" - would be required to (1) verify the identity of each customer and (2) collect the name, date of birth, physical address, and phone number of each counterparty to the transaction. Digital asset ATM operators would also be required to submit and update the physical addresses of their ATMs every 3 months to FinCEN.
U.S. citizens who engaged in a digital asset transaction greater than $10,000 through an offshore account would be required to file certain reports with the Internal Revenue Service.
Finally, the Act would require FinCEN, the Treasury, Securities and Exchange Commission, Commodity Futures Trading Commission, and the Drug Enforcement Agency to issue reports examining the adequacy of anti-money laundering programs and reporting obligations with regard to the crypto industry.
However, it should be noted that existing MSBs, Bitlicense Holders, and SP Trust Companies - which many crypto companies are - are already subject to FinCEN requirements, so it is unclear how many additional crypto participants would be brought in under the Act that are not already subject to KYC and certain other banking rules and regulations.