Correcting the facts and debunking unfeasible illegal loan proposals

Congress has been inundated with calls to create a broader anti-money laundering framework to address the overstated (and often misunderstood) presence of illicit finance in the digital asset ecosystem. . It’s time for a serious discussion about what these proposals mean and why they’re wrong.

First, much of this debate has been reinvigorated by Hamas’s unprovoked and barbaric terrorist attacks on Israel. Media subsequently falsely reported that the terrorist group had raised more than $93 million through digital assets before the October 7 attack. This claim turned out to be false, and the media quietly issued a correction. Nevertheless, some in Congress and the Treasury Department have no political opening to exploit this tragedy to advance flawed policies that amount to an effort to eliminate the future existence of the digital asset ecosystem in the United States. I saw that there was.

The Treasury Department recently sent policy proposals to Congress, some of which, unsurprisingly, reflect what Sen. Elizabeth Warren (D-Mass.) is seeking in the Digital Asset Money Laundering Prevention Act. Contains suggestions. The Treasury proposal would define a new cryptocurrency-related category of “financial institutions” under the Bank Secrecy Act, which would include digital asset wallet providers, miners, validators, and other network participants. It turns out. As such, these digital asset businesses and network participants will be subject to the same reporting standards as traditional financial institutions.

This policy proposal demonstrates a shocking lack of understanding of how information is transmitted (or not transmitted) on blockchain networks. The Treasury Department and Warren’s claims that validator node operators “raise national security concerns” and possess consumer information represent a level of ignorance that is impossible for a policymaker to make. However, this does not mean they intentionally ignored it. Rather, this is an attempt to exploit the ignorance of others by pursuing a backdoor route to effectively ban digital assets in the United States through overwhelming and completely unworkable compliance burdens.

Second, their disingenuous argument that digital wallet providers should be considered in the same realm as financial institutions opens the door to an over-enhanced intermediary financial system. According to the Treasury Department’s rationale, American Security, the safe’s manufacturer, should also be designated as a financial institution because American Security’s safes protect tangible personal assets. Just like a self-hosted wallet protects your personal intangible assets. Clearly, their arguments are disingenuous, as are the proposals from my colleagues and the Treasury.

Facts matter. If Congress wants to unite around serious proposals to combat illicit finance, it must acknowledge that digital assets on blockchain are not a preferred vehicle for terrorist financing. Additionally, movement into and out of the digital asset ecosystem is already subject to bank secrecy laws today, and blockchain provides an immutable record of all on-chain activity. Unfortunately, this is not sufficient for those who want to control the ability of individuals to transfer their property (digital assets) between peers or away from third-party intermediaries. Those who attack self-custody clearly want someone to manage your assets on their behalf.

Some have attempted to criticize my Coin Preservation Act, which prohibits any attempt by government agencies to interfere with an individual’s right to hold digital assets in a self-hosted wallet. My bill simply preserves what should be unanimously approved as an inalienable property right. But heavy-handed arguments like the ones put forward by Warren and the Treasury Department are hindering the serious work we are doing to bring regulatory clarity to the ecosystem.

The first step in any approach to combating illicit finance should focus on attracting more digital asset companies to the United States. Companies based in the United States are subject to United States laws and regulations. A framework that doesn’t work by design will drive companies and capital offshore. Instead, the House Financial Services Committee and the House Agriculture Committee should quickly advance legislation to the floor to bring transparency to the market.

Warren Davidson represents Ohio’s 8th District and serves as Vice Chairman of the Financial Services Division. Subcommittee on Digital Assets, Financial Technology and Inclusion.