The bill will make KYC checks compulsory to crypto businesses, including exchanges, wallet providers, and miners.
A bipartisan bill by US Senators Elizabeth Warren (D-MA) and Roger Marshall (R-KS) are introducing a bill that intends to crack down on potential crypto-based money laundering and terrorist financing operations.
However, its implications are much larger than preventing criminal activity.
If the Digital Asset Anti-Money Laundering Act becomes law, know-your-customer (KYC) rules will become compulsory to all crypto-related entities and businesses, spanning from wallet providers to miners, to node operators.
Once enacted, financial institutions will also be prohibited to perform transactions with digital asset mixers – a DeFi instrument that makes transactions completely anonymous, obfuscating the source of any funds.
The Digital Asset Anti-Money Laundering Act will allow the Financial Crimes Enforcement Network (FinCEN) to put in place a rule that requires institutions to report transactions that involve “unhosted wallets.” Unhosted wallets are wallets where its user has complete control over its contents, rather than being in the hands of a crypto exchange, or a third party.
This can put the DeFi industry in danger, as its users prefer the privacy and security that a non-custodial wallet offers – which unhosted wallets are a type of.
Concerns about crypto being used for criminal activity have continued to rise, with lawmakers and regulators demanding more for regulation of the industry.
The bill as of writing is in its introductory stages, where it will soon be up to lawmakers to decide whether it’s appropriate to be enacted into law.