In response to the surging interest in cryptocurrencies, lawmakers are recognizing the need to establish a comprehensive legal framework. To foster wider adoption and garner institutional attention, clear rules of engagement are necessary.
However, previous legal discussions surrounding cryptocurrencies have often included regulations that stifle innovation and oppose the very essence of these digital assets. Despite regulators’ persistence in attempting to apply traditional regulatory approaches to cryptocurrencies, it appears unlikely that they will ultimately succeed, as these digital currencies cannot be fully controlled or governed through traditional means.
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A recent report reveal that the US Senate has brought forth a new bill, providing insights into the proposed rules. Dubbed the Crypto Asset National Security Enhancement Act, this legislation mandates that decentralized finance (DeFi) platforms adhere to regulations akin to those imposed on banks. Coindesk, a leading cryptocurrency news outlet, obtained a summary of the bill, shedding light on its key provisions.
The underlying objective of this legislation is to combat crypto-related crimes, prevent money laundering, and safeguard the national security of the United States. Consequently, the bill advocates for the imposition of various obligations on applications that control or utilize DeFi protocols, ensuring enhanced security and compliance.
The bill intends “to fight the rise in crypto-facilitated crime and close off avenues for the evasion of money laundering and sanctions measures that are critical to our national security,” the briefing document read in part.
According to the bill’s provisions, if a DeFi protocol operates in a decentralized manner without a central entity, individuals who have invested over $25 million into the protocol’s development will assume responsibility for meeting these obligations.
Comparable to traditional banking regulations, these obligations encompass gathering customer information, adhering to Know Your Customer (KYC) and anti-money laundering (AML) protocols, reporting suspicious transactions, and preventing sanctioned individuals from utilizing the protocol. Consequently, users of decentralized protocols will be required to verify their identities to fulfill the bill’s obligations.
Senator Jack Reed, a member of the Senate Banking Committee, submitted the bill for consideration, marking a significant milestone in shaping the future of cryptocurrencies in the United States. As this bill undergoes the legislative process, its outcomes will have far-reaching implications for the crypto industry and its stakeholders.
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