Bipartisan invoice to manage DeFi, crypto safety dangers launched into US Senate

United States Sen. Jack Reed sponsored a bipartisan invoice launched into the Senate on July 18 that will tighten Know Your Buyer (KYC) and Anti-Cash Laundering (AML) laws and sanctions necessities for decentralized finance (DeFi). Based on a information launch on Reed’s web site, the invoice is titled the Crypto-Asset Nationwide Safety Enhancement and Enforcement (CANSEE) Act.

The invoice would topic DeFi operations to the identical necessities as “different monetary firms, together with centralized crypto buying and selling platforms, casinos, and even pawn retailers.” The invoice would make “anybody who controls that challenge” answerable for the usage of the DeFi service by sanctioned individuals. Moreover:

“If no person controls a DeFi service, then — as a backstop — anybody who invests greater than $25 million in creating the challenge will likely be accountable for these obligations.”

The invoice would additionally “modernize” Treasury Division AML powers by extending them past the normal monetary system. Based on the assertion:

“As new applied sciences like cryptocurrency more and more allow new methods to conduct monetary transactions, it’s essential to increase Treasury’s authority to crack down on illicit monetary exercise that will happen outdoors the banking sector.”

The invoice additionally set new necessities for operators of crypto kiosks (or ATMs) to forestall their use in cash laundering. Kiosk operators can be required to confirm the identities of each counterparties in a transaction.

Associated: Centralized exchanges will become gateways for DeFi — dYdX Foundation CEO

The invoice has not been published on the time of writing. A member of Reed’s employees contacted by Cointelegraph couldn’t say when the invoice can be revealed. A textual content purporting to be the draft invoice has been posted on GitHub.

Living proof:

The definition of “management” is so broadly worded that it is meaningless. No thresholds, no specifics, simply “management,” as decided by the Secretary of the Treasury. Fully and completely unworkable.https://t.co/rVk26MJwfA

— Meat (,) (@MeatEsq) July 19, 2023

Crypto Twitter has wasted no time in condemning the invoice. One commenter called it “an existential menace to DeFi” and a “nonstarter.” One other said that “imposing management duty for a $25mm funding goes to sit back VC funding into DeFi b/c passive tokenholding does NOT equal management.”

Sens. Mike Rounds, Mark Warner and Mitt Romney are cosponsors of the invoice. Reed and Warner were cosponsors of a bill introduced by Sen. Elizabeth Warren — the Digital Asset Sanctions Compliance Enhancement Act — in March 2022.

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