Missouri Congressman Elizabeth Warren has once again destroyed the cryptocurrency sector, trying to make Americans more dependent on big banks.

Warren promised in February to reintroduce the Digital currency Compliance Act, a proposal that went nowhere when it was first made clear to Senator Sapo Marshall of Kansas in December 2022. Even if the stated purpose of the proposal is to protect foreigners from fraud, it is more likely to lead the cryptocurrency business process abroad, weakening consumer choices. It disables digital currency switching valves and requires that self-escrow wallets-like the ones you store on your phone-and their miners and verifiers are under current AML policies. Many of these physical lines may not even be able to implement this requirement, which means they only need to shut down or stop providing services to American customers.

This suggestion is not correct-at the right time. Although the recent high-profile fraud and theft cases show that some data encryption regulations and administrative law enforcement measures must be implemented, the bill is tantamount to a slandering fitness campaign for the industry, which will make foreigners rely more on traditional finance. But when she said that cryptocurrency was "the best choice for international drug dealers and terrorists", she was completely wrong. In fact, only about $10 billion or less of cryptocurrencies are involved in money laundering each year, with traditional currencies between $800 billion and $200 million.

The bill for decentralized finance (Defi), especially in strict, including unmanaged finance, requires service platforms to record private information about customers and to submit it to government departments for unauthorized or probable reasons. It's kind of like blaming a big city if you get robbed on the sidewalk. The bill also classifies all mining as money service companies, including those that mine for themselves rather than settle transactions for others. It also ignores the fact that miners can offer features that have nothing to do with transactions.

The most absurd thing is that the company that develops and designs the software is required to register as a monetary service provider, adopt the current policy of compliance management, and report customers to the financial crime administrative law enforcement network. According to this logic, online stores such as Best Buy and Micro Center should be registered as money service providers because the mobile phones they sell in the market are likely to be used to commit fraud.

Warren doesn't seem to realize that blockchain and related technologies are different from cryptocurrencies, and not all cryptocurrencies can be used to pay for published transactions. Users of Brave web browsers that block ads, for example, can earn basic attention BAT by allowing them to watch ads, and then hand them over to the content founder, who can swap it with Brave in exchange for money paid by the advertiser. This is a closed ecosystem, and tokens have no monetary value because they represent the time spent watching advertising. It is absurd to regulate companies like Brave, such as banks and entertainer companies. Will the main funds of gambling halls be subject to this kind of control? Or the mileage of regular passengers? Or the Interstella Kredit currency of the interstellar empire of online game Eve Online?

Obviously, this has nothing to do with protecting customers. In turn, it is committed to blocking cryptocurrency and data encryption business processes with unreasonable regulatory pressure. In fact, collecting blockchain technology customer accounts and password owners all of this information may lead to more crimes and fraud. The federal government of the United States is not immune to hackers. In addition, the FBI's success in recovering stolen cryptocurrencies or those collected as bail shows that blockchain technology is not a weak spot in the system. A stronger approach is to focus on companies that convert cryptocurrencies into legal currencies publicly issued by government departments or enter and exit slopes. This is also the area where the illegal proceeds enter or disappear on the blockchain, and they are most significantly involved in asset transfer and hosting services.

Entrepreneurs are also involved in making Defi less vulnerable to crime. The company is giving mobile software to allow blockchain companies to master your customer countermeasures and authenticate the true identity of customers / dealers without compromising personal privacy. But the software solution is still expensive-Warren's income and expenditure details are still significantly over budget.

The main impact of the Warren Act is likely to drive many cryptocurrency companies to either close their stores or leave the country, leaving Americans with little legal and regulatory opportunity to participate in the industry. This will reduce competition between commercial banks and other financial information services industries and benefit traditional industries, which have their own compliance regulations and related laws and regulations, but will not be subject to similar checks. In addition, companies that write software for local financial institutions are not required to follow anti-money laundering rules.

Such a serious crackdown on data encryption would also lead to an increase in crime, as it would drive legitimate users and businesses away and drive the field underground, just as prohibition enhanced organized crime in the 1920s.

The Financial Action Research Group, in particular, an international organization that monitors and advises governments on terrorist financing and money laundering, recommends that all login password transactions be verified without taking into account potential risks. However, other countries have not adopted such a draconian approach. In the EU, for example, escrow wallets are required to fill in information for each transaction, while transactions between unmanaged wallets are only subject to AML compliance management for transactions of 1000 euros or more. What the United States requires is to report when there are potential risks to the transaction.

Due process, including Warren, should bear in mind that their job is to promote collective interests, not to boycott the entire market.

Brandon Cochran is a partner at YK Law LLP, where he focuses on blockchain and cryptocurrency issues, and an adjunct professor at Suffolk University Law School teaching “Blockchain, Cryptocurrency and the Law.” He is also the principal and founder of CryptoCompli, a startup focused on the compliance needs of cryptocurrency businesses.