Senate Banking Chairman Tim Scott has seen his push to pass sweeping new cryptocurrency regulations hit a stumbling block. The bill has faced criticism from Senate Judiciary chairman Chuck Grassley, who has raised concerns alongside ranking member Dick Durbin (D-Ill.) about a section of the crypto bill.
According to reports, they claimed that the section of the crypto bill would exempt certain software developers from financial licensing requirements. They also mentioned that the language would limit the ability of law enforcement to go after money laundering and illicit financing in the crypto industry.
Their complaints were noted in a private letter addressed to Scott and Senate Banking ranking member Elizabeth Warren (D-Mass.).
Tim Scott’s crypto bill encounters a stumbling block
In the letter, which was obtained by POLITICO, the pair mentioned that the language in Section 604 of the crypto bill was the type of legislative change that falls within the Judiciary Committee’s jurisdiction, adding that the panel was not involved in it before the since-postponed markup.
Scott had plans to hold a vote on the crypto market structure legislation this week, but moved the mark-up amid surprise opposition from a leading crypto firm and other uncertainties.
The section is similar to the standalone bipartisan legislation known as the Blockchain Regulatory Certainty Act that is led in the House by Majority Whip Tom Emmer (R-Minn.) and in the Senate by Senators Cynthia Lummis (R-Wyo.) and Ron Wyden (D-Ore.).
A spokesperson for Scott mentioned that the South Carolina Republican appreciates the engagement from Chairman Grassley and Ranking Member Durbin on the issue.
“As the parliamentarian has ruled, the Blockchain Regulatory Certainty Act falls squarely within the Banking Committee’s jurisdiction,” said the spokesperson, Jeff Naft. “The Chairman remains committed to protecting software developers while ensuring that law enforcement has the necessary tools to prosecute actual illegal money transmission operations.”
In his statement, Grassley mentioned that he appreciates the work done by Chairman Tim Scott and his staff as they work through the important bill.
Grassley mentioned that the country needs to protect its national and financial security while ensuring that crypto and other industries play by the same rules as everyone else. He also plans to work with Scott to reach a sound outcome.
According to reports, Grassley and Durbin are warning that the provision exempts a dangerously broad category of actors from treatment under the current criminal law. They also say the language would have likely stopped the government from bringing charges against the founder of Tornado Cash.
Lawmakers want to review the draft legislation
The pair claimed that the co-founder of Tornado Cash, a platform allegedly used to launder stolen funds, was operating as a mixer and was found guilty of operating an unlicensed money transmitting business last year, although crypto proponents and some congressional Republicans have criticized the conviction. They also mentioned that Scott’s draft legislation would create a big enforcement gap for decentralized digital asset platforms.
“Such a gap risks attracting illicit actors—like cartels and other sophisticated criminal organizations—to decentralized platforms. Criminals already use tactics to obscure unlawful transactions. This bill would make prosecuting this conduct even more difficult,” the letter said.
The concerns were shared by some law enforcement. The National Association of Assistant United States Attorneys mentioned that the crypto bill could limit the ability of prosecutors to pursue financial crimes involving the movement of funds outside established regulatory guidelines.
The issue also centers around how the market structure bill should treat the sectors of the industry known as decentralized finance or DeFi. That aspect uses software to facilitate trading and lending, cutting out centralized entities like exchanges.
Senators have been talking and have raised concerns about DeFi platforms being a hotbed for illicit finance. They have called for changes to the BRCA language and were preparing to amend it during the markup.
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Source: https://www.cryptopolitan.com/tim-scott-crypto-bill-criticism-us-senate/