US gov’t removes two crypto AML rules from national defense bill

The United States government has eliminated two provisions from the National Defense Authorization Act (NDAA) that were designed to address anti-money laundering (AML) concerns involving cryptocurrency.

The NDAA is a legislation that authorizes how the country’s defense department can use federal funding. Among the extensive list of provisions removed from the NDAA, two specifically outlined a thorough review system and reporting of crypto activities to combat illicit practices.

National Defense Authorization Act Conference Report. Source: U.S. Senate Committee on Armed Services

The first provision mandated the US Secretary of the Treasury to coordinate with banking and government regulators in setting up a risk-focused examination and review system on crypto for financial institutions.

The second provision addressed combating anonymous crypto asset transactions, particularly involving crypto mixers and tumblers.

This involved producing a report detailing the volumes of crypto asset transactions linked to sanctioned entities. Furthermore, the report would cover the regulatory approaches adopted by other jurisdictions.

Following that, guidance would be given on the implementation of crypto regulations to the U.S. government:

“Recommendations for legislation or regulation relating to the technologies and services described in paragraphs (1) and (3).”

On July 28, Cointelegraph reported that the United States Senate passed the NDAA worth $886 billion.

The crypto-related amendments included elements from the Digital Asset Anti-Money Laundering Act, introduced in 2022, and the Responsible Financial Innovation Act, which seeks to set up precautions to avoid another FTX-style incident in the industry.

This was proposed by a team of senators, including Cynthia Lummis, Elizabeth Warren, Kirsten Gillibrand, and Roger Marshall.

Related: FinCEN proposes designating crypto mixers as money-laundering hubs

In recent times, the US government has been deliberating on issues related to money laundering and terrorist funding facilitated through the use of crypto.

The Financial Services Committee of the US House of Representatives held a meeting on November 15 to discuss illegal activities within the crypto ecosystem.

During the meeting, there was also a review on how proactive crypto exchanges and decentralized finance providers are to prevent money laundering and terrorist financing.

Magazine: Lawmakers’ fear and doubt drives proposed crypto regulations in US