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Thursday’s House of Financial Congress session provided significant predictions that cryptocurrencies and money laundering will be addressed in current legislative processes.
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At the meeting titled “In The Context of Crypto Crimes II: Evaluating Strategies to Combat Money Laundering,” Congress members discussed how malicious individuals use cryptocurrencies for money laundering.
With both parties focusing on money laundering regulations and laws, Republican leaders requested a more detailed review of AML (Anti-Money Laundering) in the Financial Services Committee, while Democratic leaders in the Senate planned to work on a special bill against money laundering.
Republican Representative French Hill from Arkansas, at the beginning of the session, proposed regulation forcing miners and validators to take more stringent measures in combating money laundering. Hill stated that miners and validators assume a similar role to internet service providers.
Hill also received opinions from former Treasury official Michael Mosier while questioning whether it was logical to apply BSA (Bank Privacy Act) requirements to miners and validators.
Mosier confirmed that miners and validators act like internet service providers.
“So, would forcing them, a validator or a miner, to be a money services business contribute in any way to preventing the financing of terrorism in crypto use?” Hill asked.
Mosier’s support for this suggestion and the fact that this would abolish the concept of customer emphasizes that cryptocurrency miners and validators need to act more transparently and accountable.
Republican Representative Warren Davidson from Ohio, by asking authorities what tools are provided to track malicious actors using digital assets, indicates the need to strengthen control and monitoring mechanisms in this field. Davidson emphasizes the importance of local authorities understanding these tools better, expressing that this will increase their trust.
Stephen Lynch from Massachusetts (House of Financial Services)
Democratic Representative Stephen Lynch from Massachusetts, by criticizing the AML standards in the digital asset sector, draws attention to the regulation and control deficiencies in the sector. Reminding of the $50 million fine paid by Coinbase to the state regulator of New York last month, he emphasizes that the compliance policies of companies in the sector are insufficient and this leaves them vulnerable to crimes such as money laundering. Lynch points out that inconsistencies among companies in the sector are a serious problem, considering the global nature of technology.
Democrat Representative Sean Casten from Illinois warned that illegal activities in the crypto world might be significantly underestimated. Casten is working on the House version of Warren’s bill in the Senate. Warren’s bill aims to strengthen banking secrecy law requirements for cryptocurrencies.
“If I say that I witnessed a crime in front of the police station last year, if no crime has been committed and therefore claim that there is no crime in my community, we would have some questions,” said Casten in his statement on Thursday.
At the hearing, senior member of the Atlantic Council Carole House stated that Blockchain analytics firms only see chain activity and therefore miss what happens outside the chain.
He also questioned the difficulties encountered by blockchain analysis companies when they start moving between blockchains while tracking illegal activities.
TRM Labs’ global policy president Ari Redbord told
TRM Labs’ global policy president Ari Redbord told Casten that the company tracks the flow of funds on 29 different block chains. He then added that tracked funds made it difficult to find bad actors’ ramps.
The second hearing focusing on crypto and illegal finance was held this week. At a House Financial Services Committee hearing on Wednesday, Treasury Secretary for Terrorism and Financial Intelligence Brian Nelson responded to data claims that Hamas, along with other militant groups, used crypto as a financing tool worth millions of dollars ahead of attacks in Israel, according to the Wall Street Journal statement.
However, it was stated that the data in this article came from the blockchain forensics firm Eliptic. Nelson said the numbers in the article were exaggerated.
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