Bipartisan Effort to Regulate DeFi and Crypto Security Risks in US Senate
Bipartisan bill introduces regulations for DeFi and crypto security risks
A bipartisan bill known as the Crypto-Asset National Security Enhancement and Enforcement (CANSEE) Act has been introduced in the US Senate by Senator Jack Reed.
The bill seeks to strengthen Know Your Customer and Anti-Money Laundering (KYC/AML) requirements for decentralized finance (DeFi) while extending AML authorities to cover crypto activities.
Under the proposed legislation, DeFi operations would be subject to the same regulations as other financial entities, such as centralized crypto trading platforms, casinos, and pawn shops.
Individuals investing over $25 million in a DeFi project would be responsible for compliance obligations, even in cases where no centralized control exists.
Additionally, the bill includes new requirements for crypto kiosk operators to prevent money laundering.
Expanding AML authorities to address evolving financial activities
The CANSEE Act aims to modernize the Treasury Department's AML authorities by extending them beyond traditional banking systems.
With the rise of new technologies like cryptocurrency and decentralized finance, there is a growing need to combat illicit financial activities occurring outside the traditional financial sector.
The bill recognizes the importance of adapting regulations to address these evolving financial activities and prevent potential abuses.
Furthermore, the legislation includes provisions to enhance oversight of crypto kiosk operators, commonly referred to as ATMs, to mitigate money laundering risks.
These provisions would require kiosk operators to verify the identities of both parties involved in a transaction, strengthening security and compliance measures.
Criticism and concerns from the crypto community
The CANSEE Act has faced criticism within the crypto community, particularly on social media platforms like Crypto Twitter.
Some individuals argue that the bill poses an existential threat to DeFi and could potentially stifle venture capital investment in the sector.
They highlight concerns that the requirement for individuals investing over $25 million in a DeFi project to assume compliance obligations might discourage large-scale investments.
Additionally, there are concerns about the impact on passive tokenholders who could be deemed to exert control due to their significant investments.
While a draft version of the bill has been posted on GitHub, its publication date remains uncertain.
Cosponsors and related legislation indicate bipartisan efforts
The CANSEE Act has gained support from several cosponsors, including Senators Mike Rounds, Mark Warner, and Mitt Romney.
Senators Reed and Warner were also cosponsors of the Digital Asset Sanctions Compliance Enhancement Act introduced by Senator Elizabeth Warren earlier this year.
These bipartisan efforts demonstrate an ongoing commitment to address regulatory and security concerns surrounding cryptocurrencies and decentralized finance.
By collaborating across party lines, lawmakers aim to create a comprehensive framework that ensures the growth and stability of the crypto industry while safeguarding against illicit activities.
This concerted effort reflects the importance of bipartisan cooperation in navigating the complexities of the evolving crypto landscape.
For more information on crypto-related crime, read our magazine article
To learn more about the increasing focus of US enforcement agencies on crypto-related crime, check out our magazine article titled 'US enforcement agencies are turning up the heat on crypto-related crime.'
The article delves into the efforts being made by authorities to combat illegal activities in the crypto space and provides valuable insights into the evolving regulatory landscape.
References
Cointelegraph By Derek Andersen. (July 19, 2023). Bipartisan bill to regulate DeFi, crypto security risks introduced into US Senate. cointelegraph.com.
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