Warren’s Crypto Bill Aims at Financial Freedom, Not Fraud

Beyond the politically connected scammers and frothy valuations, the appeal of cryptocurrencies lies in their potential to do what cash does, but across distances. When governments inflate money, people turn to other stores of value, including cryptocurrencies. When politicians and their financial sector cronies block transactions they disapprove of, people seek alternative means of doing permissionless deals, including cryptography. So when officials talk about removing the privacy and autonomy of cryptocurrencies like bitcoin, they know they would do the same for cash if they could.

“Rogue nations, oligarchs, drug lords and human traffickers are using digital assets to launder billions in stolen funds, evade sanctions and finance terrorism,” said Sen. Elizabeth Warren (D-Mass.) angry this week. “The crypto industry must follow common sense rules like banks, brokers, and Western Union, and this legislation would ensure the same standards apply to similar financial transactions. The bipartisan bill will help close loopholes in crypto money laundering and will strengthen the application to better protect US national security.”

The bipartisan bill Warren is referring to sports the biased moniker, Digital Assets Anti-Money Laundering Act of 2022. Stripped of grandiose claims, he attempts to extend the financial surveillance state concocted by drug warriors and anti-terrorist fear mongers to cryptocurrency. Warren and company chose an opportune moment to do just that, while the public is busy with a financial scandal grabbing headlines and tainting cryptocurrency’s already sketchy reputation.

In fact, that of Sam Bankman-Fried shenanigans on FTXperhaps hidden by generous political donationslook old school, including mixing personal and corporate funds in ways that would have raised red flags long before digital tokens. But they cast more shade on a crypto sector that had yet to gain mainstream American acceptance. After years of halting warnings that cryptocurrency is bleak and speculative values ​​are detached from reality, many people are primed to believe the worst.

“Crypto is an interesting technology that has been terribly unlucky: its flagship, bitcoin, increased in value 10,000 times in just a few years,” commentator Scott Alexander commented. wrote earlier this month. “When something goes up in value 10,000 times, it’s hard to think of it in any other context. Whatever it was before, now it’s ‘that thing that went up in value 10,000 times.'”

Alexander notes that despite the fact that the cryptocurrency sector is being criticized by the press and politicians, it remains popular in countries where it is used for its intended purpose as a store of value and a medium of exchange in defiance of authoritarian controls. “Vietnam uses cryptocurrency because it is terrible at banks,” he notes. “There’s a history of the government forcing banks to make terrible loans, and then those banks collapsed.” In socialist Venezuela, “cryptocurrencies provide a hard-to-ban alternative that has become popular among Venezuelan scammers and small businessmen.”

This happened in Turkey when the government got serious about turning the lira into toilet paper and people bought gold, foreign currency and bitcoin. Bitcoin also became a means to Canadian protesters to avoid government attempts to financially isolate their protest movement.

“Of grade A technology focused on avoiding banking and governance failures will target the countries with the most banking and governance failures!” adds Alexander.

But any technology that can be used by good people can also be used by bad people. That’s just as true of window shades as it is of cryptocurrency (or cash). The same privacy sought by a family going through nightly routines could be served by a bomb-building terrorist, just as companies and activists evading a hostile state might use the same currency that buys bomb parts. Politicians love to play with possible abuses.

“After the terrorist attacks of September 11, 2001, our administration enacted significant reforms that helped banks weed out bad actors from America’s financial system. Applying these similar policies to cryptocurrency exchanges will prevent them from being abuse digital assets to finance illegal activities without limiting the law -permanent access by US citizens”, insists Sen. Roger Marshall (R–Kan.), co-sponsor of the Digital Assets Anti-Money Laundering Act of 2022.

When politicians take the post-9/11 panic that supercharged the surveillance state as their model, take them seriously. the legacy of that weather is widely recognized as a too powerful government that meddles in the lives of Americanssubmitting our activities and communications to surveillance Y diminishing our freedom. With their bill, Warren, Marshall and company want to extend that surveillance to financial technology that was explicitly developed to enhance individual freedom and privacy.

“The bill first seeks to classify self-hosted wallets as money service businesses.” precautions Nicholas Anthony of the Cato Institute. “For those unfamiliar, self-hosted wallets are simply the digital equivalent of a wallet in your pocket or purse…Where much of the financial surveillance in the United States relies on what is known as the third party doctrine, Self-hosted wallets offer people protection from government surveillance and censorship. However, Senator Warren’s bill would end that protection.”

The bill, Anthony says, would “classify cryptocurrency miners, validators, and network participants as money service businesses.” He also “sets his sights on cryptocurrency mixers” that “offer people the opportunity to improve their privacy when using cryptocurrencies on public blockchains.”

Indeed, the language of the bill specifies that “the Secretary of the Treasury shall promulgate a rule that prohibits financial institutions… from handling, using, or transacting in business digital asset mixers, privacy coins, and other technology that enhances anonymity”.

Senators Warren and Marshall talk about “terrorism” and “drug lords,” but their clear goal (whether or not within their reach, which is another matter) is to strip cryptocurrencies of their ability to be used meaningfully. private and without permission in the same way that we use cash. His objections to digital money also apply to notes and coins. Ultimately, it is not cryptocurrencies that they fear, but our freedom to earn, buy, save, and donate without being impoverished, vetted, or detained by government officials.

Bitcoin and other digital tokens have their flaws, but they are an attempt to fulfill a widespread desire for trusted stores of value and control-independent means of exchange. And while all of those forms of money are vulnerable to fraud and theft, that’s already illegal. The Digital Assets Anti-Money Laundering Act 2022 does not even attempt to address such crimes, rather it is an attack on privacy and financial freedom. For all the reasons politicians go after cryptocurrency, you can bet cash is next.