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New AML Bill, Senate Banking Hearing, Stablecoins

Crypto Policy Brief - Week of 4.12.24

Good morning and happy Friday. This week, we dive into a new crypto AML bill, a Senate Banking hearing, and a new push by Senator Warren to stop stablecoin legislation.

Top Points

  • Senators Thom Tillis (R-NC) and Bill Hagerty (R-TN) unveiled a draft bill aimed at clarifying AML rules for centralized crypto firms and granting law enforcement more tools to combat illicit activity involving digital assets.

  • At a Senate Banking hearing, Senators discussed combatting crypto-related illicit finance and sanctions evasion with Treasury Deputy Secretary Adeyemo, but consensus around any specific legislation is still lacking.

  • Senator Elizabeth Warren (D-MA) targeted stablecoin legislation with a new letter urging HFSC Chair McHenry and Ranking Member Waters not to enact regulations that would further integrate stablecoins into the U.S. banking system.

  • Chair McHenry and Ranking Member Waters reportedly met with Senate Majority Leader Chuck Schumer (D-NY) about using an FAA reauthorization bill as a vehicle for stablecoin legislation, though no final deal has been reached.


On Monday, Senators Thom Tillis (R-NC) and Bill Hagerty (R-TN) introduced a discussion draft for the "Ensuring Necessary Financial Oversight and Reporting of Cryptocurrency Ecosystems Act" ("ENFORCE Act").

Here are the highlights:

The bill would clarify that centralized, customer-facing digital asset financial institutions are subject to anti-money laundering ("AML") rules like establishing internal AML programs, know your customer requirements, and suspicious activity reporting. §§ 2-4.

  • Digital asset financial institutions would be defined to include crypto exchanges, custodians, and certain issuers. § 2.

  • Because centralized firms who hold customer funds are generally considered money services businesses under current law, this provision mainly clarifies, rather than expands, the requirement that digital asset financial institutions comply with existing AML rules.

Section 5 would authorize Treasury to take "special measures" against foreign financial firms, bank accounts, or classes of transactions that Treasury designates as primary money laundering concerns in connection with illicit digital asset activity.

  • In effect, this provision clarifies that Treasury's special measures authority under Section 311 of the Patriot Act can be applied to digital asset firms and transactions.

  • Special measures include requiring U.S. financial institutions to follow enhanced recordkeeping and reporting requirements and to restrict certain transfers of funds involving primary money laundering concerns. See § 5 (amending 31 U.S.C. 5318A).

  • Note: Treasury, through FinCEN, has already invoked Section 311 authority as the basis for its proposed rule to designate crypto mixing as a class of transactions of primary money laundering concern.

Section 6 would require digital asset financial institutions to abide by the same anti-tip off rules as traditional financial institutions.

  • In other words, when law enforcement investigates a customer of a digital asset financial institution (e.g., account information is subpoenaed), the institution would be prohibited from "tipping off" the customer of the investigation prematurely.

Section 7 would create a voluntary information sharing program between DOJ, FinCEN, Homeland Security, and private sector crypto firms aimed at increasing law enforcement’s ability to detect illicit transactions and emerging threats.

Section 8 would require Treasury, the SEC, and CFTC to establish digital asset specific AML examination standards.

  • This section is similar to an NDAA Amendment from last year (SA 712) intro'd by Senators Lummis, Gillibrand, Warren, and Marshall.

So What?

At the hearing summarized below, Senator Thom Tillis (R-NC) described the bill as a "first step" to address illicit finance concerns in crypto. Senator Tillis emphasized that any illicit finance bill should recognize the unique properties of distributed ledgers and allow innovation to remain in the U.S.

Given the bill is still in discussion draft form, the short legislative calendar before the election, and that Democrats will likely want to add more meat to the bill, it is unlikely to pass in its current form this Congress.

Still, the bill will likely serve as a foundation for future Republican AML bills and a counter to more crypto-hostile bills like DAAMLA and CANSEE. It's also a good example of how smaller standalone proposals can get rolled into more comprehensive bills.

Senate Banking Hearing on Illicit Finance

On Tuesday, the Senate Banking Committee held a hearing on illicit finance and sanctions evasion with Treasury Deputy Secretary Adeyemo.

Here are the key crypto-related takeaways:

  • Deputy Secretary Adeyemo focused his testimony on asking Congress to grant Treasury more power to combat illicit finance activity involving digital assets, often pivoting to crypto even when asked about issues like the Administration's policies regarding Iranian oil sanctions.

  • Chairman Sherrod Brown (D-OH) sounded generally supportive of giving Treasury more authority to police crypto, but refrained from endorsing any specific bills or proposals. He plans to keep working with Adeyemo and Committee Members on the issue.

  • Ranking Member Tim Scott (R-SC) argued the Administration is using crypto as a "scapegoat," and that Adeyemo's focus on digital assets misses the bigger picture (i.e., illicit financial activity involving traditional assets).

  • Senator Elizabeth Warren (D-MA) argued that because blockchain validators earn a fee by processing cryptocurrency transactions, validators should be subject to the same AML rules as traditional financial institutions. She also claimed North Korea and Iran are making millions of dollars from validating crypto transactions.

  • In general, Committee Members on both sides of the aisle are interested in doing more to combat illicit activity and sanctions evasion, but in general, Committee Democrats want to adopt a more aggressive regulatory approach and are more focused on crypto-related concerns than Committee Republicans.

Senator Warren Stablecoin Letter

On Monday, Senator Elizabeth Warren (D-MA) sent a letter to HFSC Chairman Patrick McHenry (R-NC) and Ranking Member Maxine Waters (D-CA) urging them to consider the risks stablecoins pose to consumers, financial stability, and national security as they work on crafting a regulatory framework.

In short, Senator Warren argued that creating a new regulatory framework for stablecoins may "amplify and entrench" risks "rather than mitigate them" by allowing stablecoins to integrate deeper into the financial system. Letter at 1.

Senator Warren also spent much of the letter targeting illicit finance concerns, citing recent Chainalysis reports finding that stablecoins account for the majority of illicit transaction volume. Letter at 2-4.

She also flagger concerns with "public, permissionless blockchains" in general:

"Efforts to integrate stablecoins into the banking system must also grapple with the risks posed by stablecoins issued over public, permissionless blockchains. Most stablecoins – including Tether and USDC, which together account for 90% of stablecoin market cap – are issued over public blockchain networks like Ethereum in which no prior approval is needed for parties to participate in the settlement and processing of stablecoin transactions and the communication of transactions to other participants." Letter at 3.

So What?

The harsh criticisms and concerns raised in the letter suggest Senator Warren is more concerned with killing any stablecoin bill than improving one. The letter is likely primarily aimed at discouraging Democrats from supporting any bipartisan agreement that might emerge.

Bitcoin Policy Summit Highlights

On Tuesday, the Bitcoin Policy Institute held their annual Bitcoin Policy Summit. Several Members of Congress attended and shared thoughts on crypto policy.


  • Senator Kirsten Gillibrand (D-NY) said she continues to work on bicameral, bipartisan stablecoin negotiations and that new bill text may be released this week or next.

  • Rep. Patrick McHenry (R-NC) once again listed enacting stablecoin legislation as one of his top priorities before retiring from Congress at the end of this year.

  • Senator Cynthia Lummis (R-WY) discussed examples of Bitcoin mining leading to energy innovation and encouraged attendees to get vocal about Bitcoin and crypto this election cycle.

  • Senator Marsha Blackburn (R-TN) pointed to blockchain based payments as a potential solution to high credit card swipe fees, noting bipartisan interest on the Hill in lowering swipe fees. She also emphasized her opposition to CBDCs and how Tennessee is becoming a Bitcoin-friendly hub.

Look Ahead

Quick Hits


  • Punchbowl's Brendan Pedersen reported that HFSC Chair McHenry and Ranking Member Waters met with Senate Majority Leader Chuck Schumer about using an FAA reauthorization bill as a legislative vehicle for stablecoins - though a deal has yet to be finalized.

  • Rep. Frank Lucas (R-OK) - the most senior member on HFSC - is running for HFSC Chair next Congress.

    • While crypto hasn't been a priority for Rep. Lucas, he voted for the Clarity for Payment Stablecoins Act, Keep Your Coins Act, FIT 21, and a SAB 121 repeal in committee. He's also a cosponsor of Rep. Emmer's anti-CBDC legislation.

  • Top policy officers at Coinbase and Circle sent a letter to Senate leaders Chuck Schumer (D-NY) and Mitch McConnell (R-KY), urging them to support FIT 21 and the Clarity for Payment Stablecoins Act.

    • Letter.

    • The Letter also recommends:

      • (1) clarifying that IEEPA covers foreign companies with U.S. touchpoints, including issuers of stablecoins that reference the U.S. dollar,

      • (2) allocating additional resources to law enforcement,

      • (3) improving information sharing, and

      • (4) strengthening cybersecurity initiatives.

    • Coinbase and Circle also "endorse constructive proposals that would enhance interagency coordination and explore risks associated with decentralized finance."



  • The SEC plans to recommend an enforcement action against Uniswap Labs for operating an unregistered securities broker and exchange.

  • The Uniswap protocol inventor responded on X:

U.S. v. Roman Storm

U.S. v. Eisenberg

SEC v. Richard Schueler (aka Richard Heart)


  • FinCEN commends Coinbase's BSA efforts in recent letter:

Thank you for reading and please enjoy your weekend.



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