In 2022, Massachusetts Senator Elizabeth Warren authored a bill that would require cryptocurrency wallet providers to comply with bank Anti-Money Laundering rules. Not crypto exchanges, mind you, but the wallets themselves. Kansas Senator Roger Marshall joined her on the proposal as a co-sponsor.
Sadly, Marshall betrayed the populist principles he ran on as a candidate. The bill also betrayed the civil liberties and privacy tenets of progressivism that Warren espouses.
Warren and Marshall are planning to reignite that debate on Capitol Hill this summer and have enlisted law enforcement advocates to their cause. Prosecutors and federal agents doubtless support the bill, as they have every other bill that turns the one-way ratchet of financial surveillance. If they had their way, our personal bank account and credit card logins would rest on a central repository for the Department of Justice to access at will and without a warrant.
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The Warren bill would require that anyone who designs a crypto wallet (a computer program designed to store the encryption code that helps to keep your crypto tokens secure) register as a money services business and, essentially, be regulated like a financial institution.
This means that any computer programmer entrepreneur who writes code to help customers control crypto investments from their phone — and to help keep the crypto secure from hackers — would need to register with the Treasury Department as if they were Western Union. Good luck with that, crypto startups.
Last year, Senator Warren introduced a bill that would adopt’s China’s approach, by imposing a de facto ban on public blockchains hidden under the guise of AML compliance.
Reports say the bill will be reintroduced again soon.
Let’s not take our cues on crypto from the CCP.
— Jake Chervinsky (@jchervinsky) February 17, 2023
Warren instigated the bill. The quiet part she is not saying out loud (and that Marshall doesn’t seem to understand) is that this blunt application of rules for Western Union, when applied to entrepreneur computer coders, doesn’t work. They can’t comply, and she knows it.
This bill is a Trojan horse designed to destroy the crypto markets under the false guise of a pro-national security bill. It’s a smart strategy. Convince national security conservatives that this is an answer to a perceived problem, particularly members with little background knowledge of how crypto works, and then let crypto development die off.
Related: Sen. Lummis: My proposal with Sen. Gillibrand empowers the SEC to protect consumers
The legislation also seeks to outright ban crypto privacy tools. If the vision of Bitcoin (BTC) as a means of payment will ever be realized, it needs to be private. Without privacy tools that would be banned by this legislation, every time you use Bitcoin to pay for a coffee, the barista can use your public key to look up your entire transaction history. Thieves and hackers can do the same.
There are tools on popular blockchains like Bitcoin and Ethereum that can provide user privacy, and they are being used around the world, as we speak, by citizens of totalitarian regimes like Iran’s. Women in Afghanistan living under Taliban rule use these crypto tools to provide for their families in secret. The Warren/Marshall crypto bill to end privacy would expose all of these crypto users to surveillance by the Taliban, Russia and North Korean hackers alike. That ultimately harms national security.
When donors sent Bitcoin to Canadian trucker protestors over vaccine mandates in Canada — protesters aligned with Marshall’s views against censorship and cancel culture — the Canadian government tracked down those donors and aggressively canceled their bank accounts.
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The proposed bill would force crypto wallet providers to adopt regulations similar to those imposed on traditional banks that were used by Canadian authorities against the truckers. Marshall was glad to get help from Trump voters in his reelection, but now seems to be doing an about-face on that commitment. Marshall promised to fight against censorship and cancel culture — not give Warren allies more tools for censorship.
It’s ironic that even after Marshall gave trucker protest leaders a tour of the United States Capitol, he now supports a tool that has already been used against Canadian trucker protesters and those who tried to donate Bitcoin to support them. Ultimately, Marshall’s decision to co-sponsor this bill betrays the populist and pro-Trump principles he ran on as a candidate.
When Marshall was asked to choose between taking a stand against the financial regulatory tools progressives use to cancel anyone they disagree with or standing with Warren and her Trojan horse bill to destroy cryptocurrency, he chose to stand with Warren. Hopefully, his Republican colleagues in the Senate will not make the same mistake.
Law enforcement’s tired refrain that some really bad crimes might occur without the latest surveillance law should fall flat in Congress. And if it does not, civil libertarians on the Supreme Court — such as Justice Neil Gorsuch — may be crypto’s last hope.
J.W. Verret is an associate professor at the George Mason Law School. He is a practicing crypto forensic accountant and also practices securities law at Lawrence Law LLC. He is a member of the Financial Accounting Standards Board’s Advisory Council and a former member of the SEC Investor Advisory Committee. He also leads the Crypto Freedom Lab, a think tank fighting for policy change to preserve freedom and privacy for crypto developers and users.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.