In a collective effort, the Blockchain Association, along with more than 80 ex-military and security professionals, including the Chief Policy Officer for Coinbase, conveyed their opposition to the Digital Asset Anti-Money Laundering Act (DAAMLA) in an open letter addressed to the US Congress. The act, initially introduced in 2022, advocates for know-your-customer (KYC) requirements for digital asset wallet providers, miners, transaction validators, and other network participants.
DAAMLA’s Key Provisions
The act, in its proposal, outlines several key provisions, including the imposition of KYC requirements for various digital asset entities and directing the US Financial Crimes Enforcement Network (FinCEN) to issue guidance on handling anonymized digital assets. It also mandates the establishment of an anti-money laundering and combating the financing of terrorism (AML/CFT) examination process for money service businesses and other digital asset entities. Additionally, DAAMLA suggests measures for verifying identities in transactions involving unhosted crypto wallets.
Blockchain Association’s Critique
The Blockchain Association contends that the implementation of DAAMLA poses a substantial risk to the strategic advantage of the United States. It argues that the act could potentially jeopardize tens of thousands of jobs and may not significantly impact the targeted illicit actors. The association asserts that this legislation could inadvertently push a significant portion of the digital asset industry overseas, hindering law enforcement activities rather than enhancing them.
Historical Context and Previous Communications
This is not the first time the Blockchain Association has expressed its concerns to the US Congress. In November of the previous year, the association communicated its apprehensions, highlighting the potential misuse of reports on cryptocurrency by Hamas to promote DAAMLA. In response, US Senator Elizabeth Warren, the proponent of the act, accused crypto industry groups of engaging former defense and law enforcement officials to undermine efforts addressing the alleged role of crypto in financing terrorist groups.
Global Regulatory Context: India’s Parallel Measures
Drawing parallels with global regulatory efforts, India has also delved into regulating cryptocurrency transactions through anti-money laundering laws. In December 2023, the Financial Intelligence Unit (FIU) of the Indian government directed the Ministry of Information Technology to block the URLs of nine offshore cryptocurrency and virtual digital asset platforms for non-compliance with India’s Prevention of Money Laundering Act, 2002 (PMLA). Notable platforms affected include Binance, Kucoin, and Bittrex.
Conclusion: Balancing Regulatory Objectives
The opposition to DAAMLA from the Blockchain Association and a cohort of ex-military and security professionals underscores the complex interplay between regulatory objectives, industry concerns, and potential unintended consequences. As debates on the act continue, stakeholders grapple with finding a balance that ensures robust anti-money laundering measures without compromising innovation and the strategic position of the digital asset industry.*