Defense Bill Drops Crypto Provisions Ahead of 2023 Passage


The National Defense Authorization Act (NDAA), a military-funding bill viewed as must-pass legislation, does not include two crypto provisions addressing anti-money-laundering concerns that had been included in the Senate version. These two provisions were aimed at creating an anti-money-laundering examination standard for crypto assets and examining the use of privacy coins or other anonymity-enhancing technologies in crypto.

The NDAA details the military budget for the upcoming year, and also serves as an avenue to include other provisions. The first crypto provision would have directed the Secretary of the Treasury to establish a risk-focused examination and review process for financial institutions to look at whether reporting obligations for crypto assets under money-laundering rules were adequate and whether firms were compliant. The second would have required a report analyzing the use of mixers and tumblers, the magnitude of transactions using privacy tools, the extent to which sanctioned entities might be using those tools, and more. It would also have directed the Treasury to come up with recommendations for legislation or regulation relating to the technologies and services described.

On the same day, Senators Mark Warner (D-Va.), Mitt Romney (R-Utah), Jack Reed (D-R.I.) and Mike Rounds (R-S.D.) introduced a bill to expand U.S. sanctions rules to any parties that facilitate financial transactions with terrorists, such as Hamas, and focus on foreign digital asset companies that process or otherwise support transactions to terror groups.

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