* National security groups are urging US Senate leaders to reexamine several crypto bills.
* Led by Transparency International US, they warn that some market reforms raise the risk of illicit activity.
* In a letter to Capitol Hill, they lay out risks, including money laundering and sanctions evasion.
The crypto market has enjoyed a handful of big legislative wins this year, but a group of security experts is flagging one of the major bills as a big national security risk.
In a letter to US Senator Majority Leader John Thune and Sen. Charles Schumer, Transparency International US urged lawmakers to reexamine some parts of the digital asset market structure legislation currently under consideration on Capitol Hill.
Their concerns are focused on the Digital Asset Market Clarity Act (CLARITY Act) and the Responsible Financial Innovation Act (RFIA).
In the letter, which was also signed by the Free Russia Foundation, Financial Accountability and Corporate Transparency Coalition, and Nate Sibley, the director of the Hudson Institute’s Kleptocracy Initiative, the authors lay out the risks posed by the bills.
They argue that Congress must ensure that crypto policies include measures to protect against money laundering and sanctions evasion, among other illicit activities.
“Digital assets risk becoming the new frontier for laundering the proceeds of corruption, including bribery and embezzlement,” the letter states, citing the example of Tareck El Aissami, a Venezuelan official accused of embezzling state funds into crypto and moving them through US exchanges.
The letter’s recommendations builds on the recent market structure framework provided by Senate Democrats, which highlighted the need for stricter regulatory measures for digital assets. Democratic senators previously argued that the RFIA could lead to a financial crisis due to risks stemming from the high volatility of most cryptocurrencies.
“These blind spots in our crypto laws would give drug cartels, fentanyl traffickers, and corrupt regimes like Iran, North Korea, and Russia exactly what they need to anonymously move dirty money and fund their crimes,” Scott Greytak, Deputy Executive Director of Transparency International US, told Business Insider.
For instance, a loophole in the RFIA could enable decentralized crypto platforms to avoid policies designed to prevent money laundering and terrorist financing. The letter argues that the US Treasury Department should have the power to enforce anti-money laundering (AML) measures on DeFi platforms in order to prevent criminal activities.
The authors also advocate for measures to eliminate certain loopholes for crypto mixers such as Tornado Cash, which has already been tied to criminal activities. As it notes, the RFIA would allow companies to avoid accountability by claiming they don’t operate in the US.
“Any final legislation must make clear that digital platforms serving US customers must comply with US sanctions and AML/CFT requirements, even if nominally domiciled abroad,” the authors write.
