Sen. Elizabeth Warren, D-Mass., is introducing legislation Wednesday to crack down on money laundering in cryptocurrency.
The bill, co-sponsored by Roger Marshall, R-Kan., seeks to alleviate the risks cryptocurrency poses to national security by closing loopholes for digital assets in the financial system and bringing the crypto industry in line with regulations governing the rest of the banking world, her office said.
The legislation comes amid the collapse of cryptocurrency giant FTX and charges against its co-founder, Sam Bankman-Fried, who federal authorities allege defrauded investors by funneling money into his private hedge fund and conspired to commit wire fraud against customers and lenders.
The Senate Banking Committee, which includes Warren, is holding a hearing Wednesday on the FTX debacle and aftermath. Warren said in a statement on introducing the bill that rogue nations, traffickers and others use "digital assets to launder billions in stolen funds, evade sanctions, and finance terrorism," adding, "The crypto industry should follow common-sense rules like banks, brokers, and Western Union, and this legislation would ensure the same standards apply across similar financial transactions."
The bill would designate providers of digital asset wallets as money service businesses, bringing them under the authority of the Bank Secrecy Act, which fights money laundering in the financial system. The legislation would also direct the Treasury Department's Financial Crimes Enforcement Network to establish rules requiring financial institutions to verify customer identities, keep records and file reports about digital asset transactions involving "unhosted" wallets that operate outside exchanges. Furthermore, it would prohibit financial institutions from dealing with services that blend the cryptocurrencies of users together, obscuring their origins.
Bankman-Fried was also charged in connection with what prosecutors said was a scheme to illegally funnel millions of dollars into politics ahead of the 2022 midterm elections, misappropriating customer funds in the process. He and unnamed co-conspirators made “tens of millions of dollars in illegal campaign contributions” to both Democratic and Republican candidates and campaign committees, Damian Williams, the U.S. attorney for Southern New York, said at a news conference Tuesday.
Warren was an outspoken critic of FTX before Bankman-Fried’s indictment. She and two Republican colleagues this month requested information from Silvergate Bank, which was a banker to FTX and other Bankman-Fried entities, about its relationship with the popular crypto exchange and its founder.
