The US government has opted to eliminate two crypto-related provisions from the National Defense Authorization Act (NDAA), a pivotal legislative framework that delineates the allocation and utilization of the defense department’s budget.
The two provisions were aimed at addressing the anti-money laundering (AML) challenges posed by digital currencies, especially the use of anonymous transactions. The first provision would have required the US Treasury Secretary to work with other regulators to establish a risk-based examination and review system for crypto activities of financial institutions.
The second provision would have mandated producing a report on the volume and nature of digital currency transactions linked to sanctioned entities and other countries’ regulatory approaches. The report would have also included recommendations for legislation or regulation relating to the technologies and services.
Crypto Amendments From Previous Bills
The crypto provisions were derived from two previous bills that were introduced in 2022: the Digital Asset Anti-Money Laundering Act and the Responsible Financial Innovation Act.
The former bill sought to enhance the AML and counter-terrorism financing (CTF) framework for digital assets, while the latter bill aimed to prevent another FTX-style incident where the exchange was accused of facilitating illegal trades and market manipulation.
The amendments were proposed by a group of senators, including Cynthia Lummis, Elizabeth Warren, Kirsten Gillibrand, and Roger Marshall. The removal of the crypto provisions from the NDAA comes when the US government is increasingly concerned about the illicit use of digital assets for money laundering and terrorist financing.
On November 15, the Financial Services Committee of the US House of Representatives held a hearing to examine the illegal activities within the crypto ecosystem. The hearing also discussed how the exchanges and decentralized finance (DeFi) platforms comply with the existing AML and CTF regulations.
The US is not the only country grappling with the crypto AML issues. Several other jurisdictions, such as the European Union, the United Kingdom, and Australia, have recently introduced or proposed stricter crypto transaction and service provider rules.
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