The rise of cryptocurrencies and blockchain technology have given governments across the globe a choice.
Benjamin Graham and Allison Kingsley of the Washington Post wrote on Monday how “digital currencies, even in their current form, are a bigger threat to national governments than most people currently understand.”
Of course, the idea that cryptocurrencies are truly ‘decentralized’ and free of government wrangling is somewhat fallacious. Squawker contributor Justin Danneman has written about the Federal Reserve’s control of digital currency and blockchain projects like Coinbase, Coindesk, Kraken and Ripple.
While watching governments with a wary eye, many crypto investors and industry leaders have expressed concern about U.S Senate Bill 1241, called “Modernizing AML Laws to Combat Money Laundering and Terrorist Financing.”
The idea behind the legislation is to combat antiquated money laundering laws in the United States. There’s a relatively strong case the current statues in place are woefully inadequate to combat things like transnational criminal enterprises and technologically advanced terrorist groups.
The International Monetary Fund and the World Bank says about US$ 2.17 and US$ 3.61 trillion dollars are laundered each year. The legislation will purportedly help close legal loopholes and make evidence rules more clear so criminals can be prosecuted easier.
However, the bill’s been the subject of sharp rebukes by those across the cryptocurrency world upon its introduction back in May.
Wendy McElroy, author of The Satoshi Revolution, heralded the legislation as a “pit bull assault on Bitcoin freedom.” Tone Vayes speculated about a coming confrontation between Bitcoin holders and the US Government.
The bill’s now received the renewed attention of activists after the details of a revision were made clear. The U.S Judiciary Committee had a meeting on November 28th that transpired with little outside coverage. According to the recorded video, one of the bigger revelations was the amended definition of a ‘financial institution’.
Alongside typical financial entities like banks and credit unions, an amendment to S.1241 will now rope in “an issuer, redeemer, or cashier of prepaid access devices, digital currency, or any digital exchanger or tumbler of digital currency” under the financial institution umbrella.
Senator Dianne Feinstein also said the intentional concealment of ownership or control of a bank account would also be criminalized under the bill. This point is important because the definition of “prepaid instruments” in Section 5312 would seemingly include cryptocurrencies.
Section 13 of the legislation lays out explicit regulations about virtual currency. In addition to saying that digital currency is in the definition of a financial institution, it also says digital currencies and exchanges or tumbler are monetary instruments.
Even though the legislation did not specifically cite Bitcoins or an altcoin, this point is important because holders of cryptocurrencies could then be potentially subject to financial reporting rules enumerated under the Bank Secrecy Act (BSA).
The BSA says anyone who sends more than US$ 10,000 in, through, or out of the USA at one time must file a report with the government.
In addition, other aspects of the legislation include a report sent to Congress that would detail the effectiveness of enforced BSA legislation. Another would detail a “strategy to interdict and detect prepaid access devices, digital currencies, and similar instruments at border crossings.”
So no, the actual mechanics of the legislation aren’t calling for an outright ban on cryptocurrencies like some have alluded to.
But it does seem like if it were passed, the BSA compliance would be taken seriously. And with the amount of money already firmly established in the cryptocurrency market, it could give authorities a lot of insight into people’s personal details and financial transactions.
This alone makes the legislation a scary proposition for virtual currency holders. It’s inevitable that something designed with the concept of individual liberty in mind would be threatened. The question is how far the government is willing to go in their hunt against cryptocurrencies.