Fri. Jan 27th, 2023

• Senators Elizabeth Warren (D-Mass) and Roger Marshall (R-Kan) have introduced the “Digital Asset Anti-Money Laundering Act Of 2022,” a bill which would have sweeping impacts on the privacy of bitcoin users.
• If enacted, the bill would require custodial and self-custodial wallet providers and miners to implement know-your-customer (KYC) systems and prohibit financial institutions from interacting with privacy tools such as CoinJoin.
• The bill calls for a “rule classifying custodial and unhosted wallet providers, cryptocurrency miners, validators, or other nodes who may act to validate or secure third-party transactions, independent network participants, including MEV searchers, and other validators with control over network protocols as money service businesses,” which would imply that Bitcoin nodes would be classified as such as well.

Senators Elizabeth Warren (D-Mass) and Roger Marshall (R-Kan) have recently proposed a new bill which, if enacted, would have a major impact on the privacy of bitcoin users. The bill, titled the “Digital Asset Anti-Money Laundering Act Of 2022,” calls for custodial and self-custodial wallet providers and miners to implement know-your-customer (KYC) systems. Additionally, it would prohibit financial institutions from interacting with privacy tools such as CoinJoin, which are designed to restore the users’ ability to use bitcoin in a way that more closely resembles physical cash.

The bill also calls for a “rule classifying custodial and unhosted wallet providers, cryptocurrency miners, validators, or other nodes who may act to validate or secure third-party transactions, independent network participants, including MEV searchers, and other validators with control over network protocols as money service businesses.” This would classify bitcoin nodes as such as well and allow regulating bodies to file reports and surveil users without need for a warrant or government request.

The bill has been met with criticism from blockchain advocacy group CoinCenter, who view it as “the most direct attack on the personal freedom and privacy of cryptocurrency users and developers we’ve yet seen.” They argue that the bill’s measures go beyond curbing money laundering and privacy tools such as CoinJoin simply restore the users’ ability to use bitcoin in a way that more closely resembles physical cash.

If the Digital Asset Anti-Money Laundering Act Of 2022 is passed, it would have a significant effect on the privacy of bitcoin users. Custodial and self-custodial wallet providers and miners would be required to adopt KYC systems, and financial institutions would be prohibited from interacting with privacy tools such as CoinJoin. In addition, the bill would classify bitcoin nodes as money service businesses, allowing regulating bodies to file reports and surveil users without need for a warrant or government request. This has led to criticism from blockchain advocacy group CoinCenter, who view it as an attack on the personal freedom and privacy of cryptocurrency users.

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