Blockchain is a matter of digital governance, while governance of the analog nature involves governments and laws. Decentralization, like it or not, represents a political extreme to government, as its operations and resources are centralized. So, dear reader, you might imagine that this author found himself conflicted to explore whether or not legal matters of government might be beneficial to the progress of digital governance, blockchain and cryptocurrency. Senator Elizabeth Warren gains the support of nine other senators with her anti-crypto bill. In fact, she might even have my support.
The process
I explore photography and share content on the blockchain to earn crypto rewards. This is how I maintain digital ownership of my assets. As such, I cannot explain bills very well. I relied on Chat GPT 3.5 in order to parse the jargon and simplify things for my simple, visual photographer's brain.
Section 1
This section is just the title: "Digital Asset Anti Money Laundering Act of 2023."
Section 2
Defines various terms used in the bill, including "anonymity enhanced cryptocurrency," "digital assets," "digital assets kiosk," "digital assets mixer," "financial institution," "money services business," "unhosted wallet," and "validator."
Section 3
This section outlines the requirements for financial institutions and money services businesses related to digital assets. It fixes the definition of "financial institution" to include entities involved in digital assets, imposes regulatory requirements on such entities, and exempts certain digital asset activities from these regulations.
Section 4
This section stablishes a risk-focused examination and review process for digital asset participants designated as financial institutions and money services businesses, to assess compliance with anti-money laundering and counter-financing-of-terrorism requirements.
Section 5
This section requires digital asset kiosk owners and administrators to submit and update physical addresses of their kiosks regularly, verify customer identities, and collect counterparty information. It also mandates reporting on unregistered digital asset kiosk operators.
Section 6
This section authorizes appropriations as necessary to implement the Act. In short, the requirements necessary to meet the objectives are made available per agreement with the bill.
Executive Summary
The "Digital Asset Anti Money Laundering Act of 2023" introduces regulations aimed at combating illicit financial activities involving digital assets, including cryptocurrencies. This is the reason I think it's valuable to crypto. If the Sam Bankman-Fried's of crypto can pass under the nose of Gary Gensler and the SEC, the global public not just American will need some kind of assurances. It expands the definition of "financial institution" to include entities involved in digital assets and subjects them to regulatory requirements. The requirements inspire confidence as crypto businesses are held to the same standard as banks. The bill also mandates a risk-focused examination process to assess compliance with anti-money laundering and counter-financing-of-terrorism regulations. Rightfully so, since illicit digital asset usage reached $20 billion, with 44% of the transactions connecting to sanctioned bodies in the past year. Digital asset kiosk operators are required to submit and update physical addresses, verify customer identities, and collect counterparty information. A lot like plenty other institutions, so while there might be some dystopian doomsday scenario, crypto proponents might have to concede KYC/AML if the world is going to come on-chain. Additionally, the bill authorizes appropriations for its implementation, which I took to mean, "fitting the necessary requirements".
Final thoughts
Regulation and compliance might be the next bull run catalyst. The bill reflects a growing trend toward increased regulation and oversight of the cryptocurrency and blockchain space. It this tech is already in the financial landscape and cannot be ignored.
The anti-money laundering focus gives confidence that the bill is not aimed at hardcore freedoms of cryptocurrency. The emphasis on counter-terrorism financing measures shows how concerned the government is about misuse of cryptocurrency.
The clarification of terminology adds to the positives when you think Gary Gensler cannot admit whether or not Ethereum is a security. Clear definitions are important for various terms related to digital assets. The ambiguity slows down progress.
The implementation of these regulations may challenge busineses in the cryptocurrency industry, particularly regarding customer verification and reporting requirements. Maxis do not want to reveal any more information than necessary.
The authorization of appropriations suggests that significant resources may be required to effectively enforce these regulations and conduct examinations. I could potentially get a job in KYC and AML since it's going to be source of labor.
While regulation can provide legitimacy to the cryptocurrency and blockchain industry, it may also stifle innovation and limit the accessibility of these technologies. Striking the right balance between regulation and fostering innovation remains a key consideration for long-term adoption. I'm confident because I didn't find any glaring issues with what's presented- I agree that illicit use of crypto holds the space back. So do all the crimes, scams and hustles by people posing on Twitter. It all needs to come down if you and your grandma are going to use crypto.
