Sen. Warren's War on Self-Custody
New Bill Targets Wallets, ATMs and more
She’s back.
US Senator Elizabeth Warren (D-MA), a ranking member of the Senate’s Banking and Finance committees, has put forth a new bill, aimed at “digital asset money laundering.”
The “Digital Asset Anti-Money Laundering Act of 2022” was co-sponsored by Sen. Warren’s colleague, Sen. Roger Marshall (R-KS).
Main Provisions of Warren’s Bill
The bill aims to define many cryptocurrency infrastructure providers as “Money Service Businesses.” So what kind of providers would the proposed bill apply to? “Digital Asset Kiosks,” commonly referred to as Crypto ATMs, for one. Cryptocurrency miners and node operators would also fall under these proposed regs, as will as software developers.
Perhaps the most shocking provision in the bill is the part concerning self-custody crypto wallets and the companies who provide them for customers. The privacy of owning your crypto in a self-custody wallet would vanish, as transactions would have to be reported, by wallet providers, to the federal government.
For any of these infrastructure providers listed above, the requirements would be significant, to say the least.
All providers outlined in the bill would be required to keep personal information on any of their customers, so-called KYC info. Currently, most of these businesses do not have the personal identifying info of the users of their platforms. If that’s not bad enough, the providers would also be subject to intensive reporting requirements. Reporting transactions, holdings, dollar amounts. Reporting to the federal government, of course.
Warren’s Previous Attempts to Regulate Crypto
Just three months ago, Senator Warren crafted a strongly-worded letter to Treasury Secretary Janet Yellen, calling on Treasury to construct a stronger regulatory framework for the crypto markets.
Warren attached nine previous letters detailing two years of oversight investigations into crypto. The investigations provided evidence of crypto’s “threats to national security, the climate, financial stability, and consumer and investor protections,” said Warren’s office.
The demands to Yellen’s agency were quite simplistic, obviously crafted for those not informed about cryptocurrencies. For instance, when discussing how much energy crypto mining uses, no mention was made of the use of any renewable energy sources by miners. Currently, approximately 65-69% of mining uses renewables, much of it hydro power.
Additionally, Warren pointed out that, in her words, “the crypto market has massive levels of concentration and centralization.” Again, no mention was made that the largest cryptocurrency by market cap, Bitcoin, is completely decentralized. No founders, no organizers, no one controlling the supply or flow of coins.
Opportunistic Reaction to the SBF/FTX Debacle
Never let a good crisis go to waste.
The timing of the release of Warren’s bill appears, to many, to be taking advantage of the meltdown of the huge crypto exchange FTX and the arrest of its founder, Sam Bankman Fried.
The country is hearing about the SBF/FTX scheme, in all its sordid details, every day, from every media outlet.
Because the Ponzi scheme, the embezzlement of customer funds, the extravagant spending, all involved a player in the crypto space, the public is being told that it’s all happening because of crypto. That the crypto technology is the problem. Not the crimes of embezzlement, the underlying greed, or the lack of corporate governance.
In truth, none of Senator Warren’s proposals would do anything to prevent another FTX debacle. In the words of Peter Van Valkenburgh of Coin Center":
“The bill is focused exclusively on financial surveillance and does not address any of the issues of corporate controls that led to the collapse of FTX.” - Peter Van Valkenburgh, Coin Center.
Clearly, more cryptocurrency regulations are needed, and more are coming. Bitcoin proponents are generally not reacting favorably to this bill, as the rights to privacy and self-custody are important to them. Surveillance of this nature scares most citizens in developed nations.
Will Congress have the will to pass this bill, or will it be tweaked before passage? We’ll see.
In light of recent developments in the crypto world, will some regulation be pushed through? I’d bet on it happening.
The timing is right.
I’ll keep you posted. And thanks for reading.
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Issue No. 87, December 16, 2022
Rick Mulvey is a CPA, crypto consultant, and frequent contributor to Bitcoin Magazine. He writes about all things Bitcoin, and yells at the Yankees and Giants. He also runs marathons and makes wine, neither professionally.