Reported (Opinion) by Chris Grieco

The anti-money-laundering bill sponsored by Senators Elizabeth Warren (D-Mass.) and Roger Marshall (R-KS) purports to close loopholes in the risk of cryptocurrencies being used for illicit activity that even the Biden administration agrees is small. But the ill-conceived bill is a useful harbinger for the crypto community of a coming conflict between the community’s desire for blockchain privacy and law enforcement’s responsibility for national security.

Warren recently said she was leading an “anti-crypto army,” and her misguided Digital Asset Money Laundering Act tars and feathers cryptocurrencies by unfairly tying them to illegal activities. The reality is that even the Biden administration agrees that illicit crypto use is small – see the recent U.S. Treasury report on “Illicit Finance Risk Assessment of Decentralized Finance,” which found that “illicit activity is a subset of overall activity within the DeFi space.”

The unspoken secret among law enforcement and national security personnel is that they love crypto in its current form. Instead of trying to trace piles of cash, or requesting documents from a traditional financial institution, the blockchain is open for all to follow. Move money from one crypto wallet to the next and it’s all traceable and “on-chain.” This is especially true with advanced tracing tools that law enforcement and others are increasingly using such as those at TRM Labs or Chainalysis.null

Law enforcement’s posture is likely to change in the near future as private blockchains make tracking and tracing near impossible. Blockchain technologies are evolving and as more use cases emerge the need for financial privacy on the blockchain continues to grow. Americans expect a degree of financial privacy unknown in other parts of the world, with law enforcement requiring various degrees of due process in order to access financial information. This is true even with the generous loopholes of the third-party doctrine, and the modicum of privacy for transactions under $10,000 afforded by the Bank Secrecy Act (BSA). As recent outcries against a potential Federal Reserve-led central bank digital currency have shown, Americans expect to be able to conduct their financial affairs outside the oversight or permission of the government.null

As the blockchain becomes a more widely used technology, people are demanding a greater degree of privacy for their transactions. You wouldn’t put your credit card purchases on your Instagram page, and the same logic goes for digital assets. You wouldn’t let the world know what you bought with your crypto wallet if given the option between an open blockchain and a private blockchain. Promising startups companies such as Zcashand Aleo blockchain are building privacy-enhancing features into their offerings – allowing anonymity for blockchain transactions.

Read full report: https://www.coindesk.com/consensus-magazine/2023/05/22/sen-warrens-bill-signals-crypto-is-headed-for-a-clash-with-national-security-interests/?outputType=amp