Wall Street Bank Supports Elizabeth Warren’s Stringent Cryptocurrency Legislation

Prominent cryptocurrency critic, Senator Elizabeth Warren, has gained backing from the Washington-based banking advocacy organization, the Bank Policy Institute (BPI), for newly proposed bipartisan legislation aimed at regulating the cryptocurrency sector and closing loopholes that facilitate illegal activities.

This endorsement is considered unusual, as both Warren and Wall Street banks have rarely found common ground in the past. Indeed, the Senator has frequently criticized the trade group.

Relying on BPI’s Endorsement

In a surprising development, the Bank Policy Institute (BPI) expressed its support for the legislation, which advocates for stricter anti-money laundering regulations and counter-terrorism financing protocols specifically tailored for the cryptocurrency industry.

The rationale behind BPI’s endorsement is that the current anti-money laundering (AML) framework in the United States does not encompass digital assets.

In justifying its support for the legislation, the banking lobbyists stated,

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“BPI endorses bipartisan initiatives aimed at combating money laundering and considers this measure a significant step in that direction. The current anti-money laundering and Bank Secrecy Act framework must incorporate digital assets, and we anticipate participating in this process to safeguard our nation’s financial system and address illicit finance in all its forms.”

The bill was first introduced by the Massachusetts Senator in December 2022, shortly after the notable collapse of FTX. It was reintroduced by Warren along with three other Senators: West Virginia Democratic Senator Joe Manchin and Republican Senators Roger Marshall of Kansas and Lindsey Graham of South Carolina, on Friday.

In addition to BPI, the bill has received endorsements from the Massachusetts Bankers Association, Transparency International US, Global Financial Integrity, National District Attorneys Association, Major County Sheriffs of America, Massachusetts Sheriff’s Association, AARP, and the National Consumer Law Center (representing low-income clients), as well as the National Consumers League.

The Digital Asset Anti-Money Laundering Act

The proposed legislation aims to expand Bank Secrecy Act (BSA) obligations, including Know Your Customer (KYC) requirements, to cryptocurrency wallet providers, miners, validators, and other participants in the network.

It also appears to tackle what it identifies as a “significant gap” concerning “unhosted” digital wallets, which allow users to evade AML and sanction checks. The legislation further includes provisions directing FinCEN to issue guidance to financial institutions on mitigating the risks associated with digital assets that have been mixed using coin mixers like Tornado Cash and other privacy-enhancing technologies.

Enhancing the enforcement of BSA compliance, broadening BSA regulations regarding the reporting of foreign bank accounts to encompass digital assets, and granting FinCEN oversight of illicit financial risks associated with digital asset ATMs are among the other elements of the seven-page legislation.

This recent development follows another significant cryptocurrency bill, FIT21, which aims to resolve the jurisdictional conflict between the SEC and the CFTC regarding regulatory authority over the sector and provide essential clarity for the industry. The bill has received support from various cryptocurrency stakeholders, including Coinbase CEO Brian Armstrong.

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