As cryptocurrencies continue to develop and gain widespread adoption, governments around the world have begun to pay attention to their impact on national security. Consequently, some countries have enacted enforcement laws related to cryptocurrencies to enhance national security and combat criminal activities. Many countries have introduced anti-money laundering (AML) and anti-terrorism financing laws targeting cryptocurrencies. In an effort to prevent money laundering and prevent cryptocurrencies from being used to facilitate criminal activities and sanctions violations, a group of U.S. Senators are introducing new bipartisan legislation that demands decentralized finance (DeFi) services to meet the same AML and economic sanctions compliance obligations as other financial companies, including centralized cryptocurrency exchanges, casinos, and even pawnshops. The legislation also updates the Treasury Department's AML authority and establishes new requirements to ensure "cryptocurrency ATMs" do not become channels for illicit money activities.
Recognizing the importance of transparency and reasonable rules in protecting the financial system from criminal activities, U.S. Senators Jack Reed, Mike Rounds, Mark Warner, and Mitt Romney released the "Cryptocurrency National Security Enhancement and Enforcement Act" (CANSEE Act, S. 2355) on July 19. This legislation aims to combat money laundering and sanctions evasion involving DeFi.
The CANSEE Act will end the special treatment of DeFi, subjecting it to the same national security laws as banks, securities brokers, casinos, pawnshops, and other cryptocurrency companies, including centralized exchanges. This means DeFi services will be obliged to fulfill certain responsibilities, particularly maintaining AML programs, conducting due diligence on their customers, and reporting suspicious transactions to FinCEN.
The CANSEE Act importantly updates the Treasury Department's authority to require participants in the U.S. financial system to take special measures against money laundering threats. Currently, these powers are limited to transactions carried out in traditional banking systems. However, with the increasing adoption of new financial transaction methods, such as cryptocurrencies, expanding the Treasury Department's enforcement authority to address potential illegal financial activities occurring beyond the traditional banking sector is critical.
"DeFi and cryptocurrency ATMs are technologies that have been largely unregulated and require stronger oversight and protective measures to prevent rampant money laundering and sanctions evasion," said Senator Reed. "This legislation enhances the Treasury Department's tools to protect our national security and economic security. Drug cartels, sex traffickers, and others should not be able to use DeFi platforms to evade justice, and their victims deserve better protection. Our bill will also ensure that law enforcement has better access to information about cryptocurrency transactions, which is necessary to combat cross-border drug trafficking, arms proliferation, ransomware attacks, and other criminal activities. We must protect the integrity of the financial system against emerging threats from the most serious criminal organizations and malicious state actors."
As cryptocurrencies continue to develop, issues related to national security and law enforcement become increasingly prominent. The introduction of the Cryptocurrency National Security Enhancement and Enforcement Act provides robust support for safeguarding national security and maintaining social stability. At the same time, cryptocurrency exchanges should actively respond to the relevant requirements and establish sound management systems to ensure legitimate and compliant trading activities.
As cryptocurrencies continue to develop and gain widespread adoption, governments around the world are also enacting relevant laws to safeguard national security and combat criminal activities. These laws encompass regulatory requirements for anti-money laundering, anti-terrorism financing, cross-border supervision, and market regulation. In the future, as cryptocurrencies further evolve and gain wider applications, these laws will continue to be refined and adjusted.
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