Jerry Brito of Coin Center has raised concerns about proposed provision in the America Competes Act.
The ruling aims to let the Treasury secretly prohibit any transaction deemed to have money laundering risk.
Brito says the rule could give the Treasury unchecked discretion to ban crypto transactions.
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A new provision in the America Competes Act could give the U.S. Treasury the overarching power to immediately ban any financial transactions associated with money laundering risks. Some experts have warned the provision could be disastrous for the crypto sector if it gets passed into law.
New Ruling Could Help Treasury Curb Crypto
A new proposal in the U.S. could have disastrous consequences for the cryptocurrency sector.
The newly-presented America Competes Act of 2022 intends to boost the manufacturing of semiconductor chips in the U.S. and address supply chain issues. In addition, the bill also includes provision that could present a major regulatory hurdle for crypto.
The provision Brito called attention to aims to give overarching power to the Treasury to prohibit any transaction connected with “money laundering risk” without needing to adhere to the checks and processes prescribed within the current law.
The proposed rule would modify the Bank Secrecy Act §5318A in which the Treasury has the ability to identify and take action against “money laundering concerns” in the U.S. Under this ruling, the Treasury can also compel financial institutions to report information on what it categorizes as money laundering concerns and enforce bans on certain transactions.
However, such powers come with some checks. Today, the law requires the Treasury to make public notices before exercising those powers. The new provision removes such checks, meaning the Treasury would be able to freely exercise special powers without notifying the public. In other words, the Financial Crimes Enforcement Network (FinCEN) would be able to secretly ban any transaction it deems a “concern” under the Treasury.
If allowed, the provision could severely hamper the crypto sector. According to Brito, the provision could give the Treasury “unchecked and unilateral discretion” to prevent financial institutions such as cryptocurrency exchanges from using cryptocurrency networks. This could potentially block millions of people in the U.S. from having access to crypto without using alternatives such as DeFi or VPN technology.
The provision was first put forward by Connecticut Democrat Jim Himes (D-CT) as an amendment to the National Defense Authorization Act, but was excluded. Now, it has made its way verbatim to the America Competes Act of 2022. It was initially intended to grant FinCEN the ability to take action against anyone found to have laundered cryptocurrency proceeds from ransomware attacks, or transactions found to be evading sanctions.
Last year, Coin Center memorably led the crypto sector in a hard-fought battle against the definition of a crypto broker in the now-ratified Infrastructure Bill, but was ultimately unsuccessful. Whether the latest proposed ruling will pass through Congress remains to be seen.
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