Democratic Senator Elizabeth Warren is not shy about her dislike for crypto industry.
You can name any common criticisms of Bitcoin and she will likely have heard it: volatility issues; environmental damage;’shadowy super-coders’; and other such things.
While I don’t think her criticisms are completely invalid, I will cover them later. But they have become so predictable that it’s almost funny. Her reputation within the crypto community has been compared to Peter Schiff, who have established themselves as crypto-skeptics and can’t be expected to change their roles. Even when presented with logic and evidence.
There are two main differences between them.
First, Schiff doubts crypto’s potential investment, while Warren questions the ethics of the technology.
Warren also drafts Federal law in the United States. Schiff does not.
Warren is behind one of the most unjustified and uncalibrated legislative threats that the crypto industry has ever faced. It shouldn’t be surprising. It reads more like it was designed to harm as many participants in the blockchain network as possible than to help anyone.
Today, we will be reviewing the “Digital Asset Sanctions Compliance Enhancement Act (2022)” by Senator John McCain. It explains what it is, why it was written, and why should we be concerned about crypto.
Background of the Bill
The U.S. and its allies imposed the most severe economic sanctions ever against Russia after the invasion of Ukraine. Regulators were quick to question whether digital assets offered any loopholes that allowed Russian oligarchs bypass these restrictions, determined not to fail their attempt.
Senator Warren was naturally the first to tackle the issue. An earlier report said that Warren was working on a bill to place secondary sanctions against international crypto exchanges. It would offer exchanges the ultimatum to not transact with sanctioned persons or lose access to US markets.
This is not an unusual or unreasonable measure. To combat illicit financing, exchanges have been required to conduct background checks on all users. Russian access to major crypto market liquidity would be blocked if AML/KYC controls are not fully implemented.
The provisions of the bill went further when it was presented to Congress as a draft on Thursday.
Senator Elizabeth Warren, D.Mass., speaks at a news conference on Wednesday, September 9, 2020, on Capitol Hill, Washington. (AP Photo/Jacquelyn Martin)
Targeting “Transaction Facilitators”
The bill was co-authored by Warren and signed by around 10 other Democrats. It allows the President to ban transactions in property belonging any foreign person who is a “digital assets transaction facilitator” or trading platform.
Who is a digital asset transaction facilitator and who are they? Nearly everyone is involved in the upholding of Bitcoin, Ethereum, and other blockchain networks. Section 2 subsection 4A of this bill says:
“Digital asset transaction facilitator” refers to any person or group of people who facilitate the purchase, sale or borrowing of digital assets, as well as any communication protocol, decentralized financial technology, smart contract or any other software.
Section 3 adds to this group by defining those who “technically support” sanction parties and facilitate transactions that evade sanctions.
This language is reminiscent of last year’s infrastructure bill which caused a commotion in the crypto community. The bill placed burdensome tax reporting obligations on cryptocurrency brokers – those who make transfers of digital assets.
Brian Armstrong, Coinbase CEO, and others noted that technically, anyone who “effectuates” transactions technically includes everyone, from validators to miners to developers.
There was floor testimony at the time confirming that the bill’s language wasn’t meant to be applied in this broad way. Warren’s bill names both validators as well as software developers as targets, not only for tax reporting, but also for potential property sanctions by the U.S. government.
Bitcoin is “validating” every transaction on a regular basis with at least 15,000 nodes. In a few months, Ethereum will have more than 300,000. This is because every validator on the current beacon chain is running a full validator.
If a sanctioned person uses their technology, all of the network participants would be technically liable. This is only to protect networks that, according to Blockchain Data Platform Chainalysis, are overwhelmingly used for legal purposes.
It’s obvious how easy a bill such as this can discourage innovation and participation in all things blockchain. However, it is not obvious that it will punish Putin’s government.
This is understandable as cryptocurrencies such as Bitcoin can be peer-to-peer and borderless. They could be used by Russia to transact international trade despite their being disconnected from SWIFT.
Perhaps in a theoretical vacuum. However, so far there isn’t any evidence that Russia uses crypto for this purpose except one curious wallet identified as such by Elliptic blockchain forensics firm.
But, just the identification of this wallet shows crypto’s inefficiency for this purpose.
Although Bitcoin is immutable, it’s not private. Every transaction is recorded on the public blockchain ledger. If a person’s blockchain address is linked to their identity, as they often are through KYC compliant Exchanges, then any funds taken from that wallet could be tracked.
Tom Robinson, co-founder of Elliptic, reiterates the following:
Bloomberg reported that he said Monday that it was not realistic for oligarchs to bypass all sanctions by moving all of their wealth into crypto. Cryptocurrency is easily traceable. Crypto can be and will be used to evade sanctions, but it is not the panacea.
Although there are more Bitcoin trading methods available (peer to peer exchanges, cash trading and Bitcoin ATMs), these don’t provide the liquidity that the Russian government needs.
Targeting crypto exchanges should not be enough to stop Russia evading sanctions using digital assets.
This fact is recognized by the Federal agencies that are most influential. Christopher Wray, FBI Director, stated last week that Russia’s capability to use crypto in such a manner is “highly underestimated.” The White House and Treasury Department also said that using cryptocurrencies to evade sanctions against Russia’s sovereign scale would not be possible.
Elizabeth Warren seems to be the only person who believes a hostile, knee-jerk crackdown on crypto is necessary right now.
Conclusion: Focus on facts, not ideology
I mentioned earlier that Warren has made it so she cannot abandon her anti-crypto stance despite logic. I have evidence to support my claim.
Warren was able to meet Jony Levin, Chainalysis’ co-founder, at a Thursday hearing of the Senate Banking Committee on crypto and illicit financing. She was able to ask a series of questions about whether or not a Russian oligarch could hide $1billion in pre-purchased cryptocurrency by moving it across different chains, moving it into different wallets, and mixing the coins.
She was not interested in hearing an honest answer. Warren interrupted Levin several times to explain why none of these methods would work to hide such large amounts. However, Warren only came to the same conclusion.
She said that she was surprised at her answers, as it costs a lot to track and untangle assets and the system keeps coming up with more ways to hide the money.
Watch as @jony_levin tries to answer Sen. Warren’s questions about a hypothetical oligarch with $1 billion already in crypto pic.twitter.com/91upCRGwun
Neeraj K.Agrawal (@NeerajKA), March 17, 2022
This ignorance of crypto’s workings is what has led to unhelpful and unbalanced policy responses such as Warren’s latest bill. I would argue that she pursued an anti-cryptoidea before writing it, which is why it continues to be gripped by members of her party.
Even though criminal transaction share is declining and Bitcoin’s energy production increases, even crypto-savvy Democrats are ignoring Bitcoin’s most fundamental functions and refusing to sell a product that has been launched in other parts of the world.
When regulating this area, governments must be open-minded and open to changing their policies as they learn more. Cryptocurrency is still in its infancy. Even community veterans are still unsure what Bitcoin is.
We continue to figure that out. Perhaps the U.S. should not press the sanctions button while we do this.
Marla Brooks – Financial Analysis
My name is Marla Brooks, and I am the mainstream behind the”observednews.com” for the powerful and most delicate insights into the latest activities in the financial analysis category. I started my journey as an independent financial consultant. I had approximately nine years of experience in this field. I am free soul so; my passion for exploring the world has taken me to the nations across the globe and given me the chance to report for a portion of the best news associations. Currently, I am a full-time editor as experienced in finance and started to use my abilities.