The U.S. Senate is preparing to introduce a new bill called the Crypto-Asset National Security Enhancement Act of 2023.
New US Senate Bill Would Tighten Controls on DeFi Protocols
The U.S. Senate is preparing to introduce a new bill called the Crypto-Asset National Security Enhancement Act of 2023.
By establishing strict anti-money laundering (AML) rules on decentralized finance (DeFi) protocols, this measure seeks to regulate the cryptocurrency sector. The purpose of the law, according to the briefing document, is to combat the surge in crypto-facilitated crime and stop money laundering and the circumvention of sanctions that are vital to national security.
Anyone with a cryptocurrency wallet can use DeFi protocols, which are financial apps, to borrow, lend, and trade digital money using smart contracts. However, because they run directly on permissionless blockchains, they are more difficult to control than centralized businesses like Coinbase.
The proposed law would impose obligations on anyone who "controls" a DeFi protocol or makes a DeFi application available, such as by running a "frontend." The controlling entities would have to run anti-money laundering programmes, compile data on their clients, alert the authorities to any questionable behavior, and prevent those who have been sanctioned from using their protocol.
The law would also give the Treasury Department more power to investigate alleged money launderers operating in unconventional financial environments, such as cryptocurrency. Sen. Jack Reed (D-RI) initiated the measure, and Mike Rounds (R-S.D.), Mitt Romney (R-UT), and Mark Warner (D-VA) joined him as cosponsors.
