There are some conservatives on board with Elizabeth Warren’s anti-crypto army.
As she raises concerns about a host of issues in the crypto space, from consumer protections to environmental impact, Warren focuses on national security concerns.
It’s not just Sen. Elizabeth Warren who is branding herself as the “villain” of crypto.
In addition to recruiting conservative Senate Republicans, the Massachusetts Democrat is getting some early positive vibes from bank lobbyists who also want to rein in digital asset startups.
Warren has emerged as a leading lawmaker on crypto oversight and is trying to rally support behind a bill that will have sweeping implications for the industry via tougher anti-money laundering restrictions, including requiring crypto service providers to verify customers’ identities more frequently.
Senator Roger Marshall, a Kansas Republican who co-sponsored Warren’s legislation, said his office has been a pleasure to work with.
Some crypto advocates dismiss Warren as an outlier, and they resist Warren’s push. Her partnership with Republicans reflects broader forces that are poised to unite progressives, conservatives, watchdog groups, and bankers, who are all interested in halting crypto’s unfettered growth.
Last year, before the crypto market meltdown, digital currency lobbyists had gained serious traction with lawmakers who drafted friendlier, bipartisan legislation with input from the industry.
ICBA’s Paul Merski, who leads congressional relations, said the crypto sector has yet to prove that it is safe, secure, and superior.
After last year’s collapse of the FTX exchange, which revealed extensive industry mismanagement and led to the arrest of former CEO Sam Bankman-Fried, crypto skeptics have gained ground.
In my opinion, the most important thing is that [Bankman-Fried] spread money around Capitol Hill like dishwater, but no one asked any relevant questions at the time. As part of Warren’s investigation of Silvergate, a crypto-friendly bank linked to FTX, Louisiana Republican John Kennedy has joined his efforts.
Crypto advocates have tried to reject Warren’s anti-money laundering bill in the strongest possible terms, calling it an unconstitutional invasion of privacy that could cover a wide range of software products beyond just finance-focused digital assets. The bill has also been criticized by some former regulators.
The Treasury Department’s Financial Crimes Enforcement Network has already been policing illicit finance in crypto for years. Centralized crypto exchanges that register as money transmitters must verify their customers’ identities. As a result of Warren’s bill, other entities, such as cryptocurrency miners and digital asset wallet providers, would be subject to those kinds of responsibilities as well.
It’s so vague and broad-reaching that understanding its implications could take years, said Hogan Lovells partner Liz Boison, a former federal prosecutor who also worked at the Consumer Financial Protection Bureau when Warren was launching it.
For similar reasons, lobbyists are also trying to ignore it.
Several senators would probably filibuster something like this, according to Blockchain Association CEO Kristin Smith.
In order to advance new legislation aimed at digital currencies, top lawmakers will have to contend with Warren’s attempt to stake out a clear position and a well of support on crypto regulation.
As crypto advocates, we have urged Warren to reject his anti-money laundering bill in the strongest terms possible, calling it a broad, unconstitutional threat to privacy that could encompass a wide range of software products, not just finance-related digital assets. The bill is also being criticized by former regulators.
Those centralized crypto exchanges that register as money transmitters are required to verify the identities of their customers. The Treasury Department’s Financial Crimes Enforcement Network has already been policing illicit finance in crypto for years. Warren’s bill would extend such responsibilities to other entities, such as crypto miners and digital asset wallet providers.
Liz Boison, a former federal prosecutor who also worked at the Consumer Financial Protection Bureau when Warren launched it, said the legislation is so vague and broad-reaching that understanding and implementing its ramifications could take years.
For similar reasons, lobbyists are also trying to ignore it.
“Multiple senators would probably filibuster such a bill,” Blockchain Association CEO Kristin Smith said.
In order to advance new digital currency legislation, top lawmakers will have to contend with Warren’s attempt to stake out a clear position and build support.
“The crypto industry has an army of lobbyists and Washington insiders fighting against bipartisan rules to prevent crypto money laundering by criminals and rogue nations like Iran and North Korea,” Warren spokesperson Alex Sarabia said. Crypto should not be held to a lower standard and be subject to the same rules for the same activities to deal with the same risks.
Legislators who want crypto explained
Despite raising red flags about a host of issues in the crypto space, from consumer protections to environmental impacts, Warren focuses on national security concerns as the focus of potential crypto legislation.
During an interview, Warren said regulators have tools to address consumer fraud, but money laundering is a different issue.
In essence, the current legal structure says, “Money laundering is done here,” she said.
Warren said she tried to recruit Marshall as a co-sponsor of the bill in December after watching his questions at a Senate hearing, in which he raised concerns about crypto’s use in ransomware cyberattacks and drug trafficking. According to Warren, sanctions evasion is also a risk.
“I heard his questions and thought, now I’ve got the partner I need to pass a meaningful anti-money laundering bill,” she said.
We’re talking about it right now,” said Rounds, citing money laundering concerns. Rounds is a crypto skeptic but sees potential in stablecoins as a payment method.
At the U.S. Capitol, Senator Elizabeth Warren (D-Mass.) speaks with reporters.
As a result of the FTX meltdown, Senate Banking Chair Sherrod Brown (D-Ohio) has suggested putting together a digital asset regulation bill. In addition to financial crime involving crypto, Brown is also interested in Warren’s proposal, but it is unclear how it might relate to his plans, if at all.
In an interview with POLITICO, Brown suggested that Sen. Tim Scott (R-S.C.) – the top Republican on Senate Banking – might be more amenable to crypto-skeptic views than his predecessor, former Sen. Pat Toomey (R-Pa.).
“Toomey wasn’t skeptical, so it was better than before,” Brown said.
Although Scott hasn’t spoken much about crypto regulation, he cites several high-profile failures that resulted in consumer assets lost, regulatory gaps exposed, and illicit finance concerns as reasons for a bipartisan regulatory framework in the new Congress.
Brown’s home state’s banking trade group, the Ohio Bankers League, is encouraged by Brown’s approach as they advocate for crypto regulation and clarification that banks can offer digital asset services.
As the group’s President and CEO Michael Adelman explained, [Brown] has asked for banker insights, and much of that is defining crypto as such. “We don’t necessarily have strong feelings about who should regulate it, but just somebody needs to oversee it, just like banks. Let’s level the playing field.”