Concerns Over Enforcement Gaps and Illicit Activity
Leaders of the US Senate Judiciary Committee are advocating for the removal of cryptocurrency developer protections from the Senate's proposed crypto market structure bill. They contend that these provisions would significantly undermine existing laws governing unlicensed money transmitters.
Senate Judiciary Chair Charles Grassley, a Republican, and the committee's top Democrat, Richard Durbin, communicated their concerns to Senate Banking Committee Chair Tim Scott and ranking Democrat Elizabeth Warren. In a letter sent on Wednesday, they stated that the crypto bill, as currently drafted, would "create a significant enforcement gap for decentralized digital asset platforms."
Grassley and Durbin warned that such a gap "risks attracting illicit actors—like cartels and other sophisticated criminal organizations—to decentralized platforms." This assertion was first reported by Politico on Friday.
They further elaborated, "Criminals already use tactics to obscure unlawful transactions. This bill would make prosecuting this conduct even more difficult."
Legislative Background and Committee Jurisdiction
The Senate Banking and Agriculture Committees are currently working towards advancing legislation that would define the regulatory framework for cryptocurrencies. A draft of this bill, released on January 12, incorporated elements of the Blockchain Regulatory Certainty Act (BRCA). The BRCA aims to establish that developing crypto software or maintaining networks is exempt from federal or state money-transfer laws.
However, the Senate Judiciary Committee, which holds jurisdiction over the nation's primary criminal laws and the Department of Justice, stated that it "was not consulted or given the opportunity to meaningfully review the proposed changes in advance."
In their letter, Grassley and Durbin urged the Banking Committee to "reject any proposed language" that they believe would "weaken the government’s ability to hold culpable actors accountable for operating unlicensed money transmitting businesses."
Bill's Progress and Industry Reactions
The concerns raised by Grassley and Durbin represent the latest obstacle for the Senate bill. Previously, both the Banking and Agriculture Committees had postponed scheduled markups of the legislation in an effort to build bipartisan consensus.
Should the bill successfully navigate these committees and reach the Senate floor, it will likely require broad bipartisan support to pass, necessitating approximately 60 votes. This could mean securing the backing of all 53 Republican senators and a number of Democrats.
Coinbase, a prominent crypto lobbyist, initially withdrew its support for the bill on Wednesday due to disagreements over several provisions. However, the company stated on Friday that negotiations with lawmakers were ongoing.