Sen. Warren's new bill to regulate crypto, combat money laundering [pdf] | Hacker News Reader

Sen. Warren's new bill to regulate crypto, combat money laundering [pdf]

warren.senate.gov

33 pointsjasonhansel43 comments

This would outlaw the cryptocurrency industry in the USA. Anyone running a miner or proof-of-stake validator would be a money services business, meaning they would have to collect personal identity information on anyone submitting transactions to the network. This is technically impossible.

This bill will not pass, but if in some universe it did, the blockchain industry would move entirely offshore. It will not kill the industry, but certainly set it back and make the US a non-entity. This is a very reactionary, "don't let a crisis go to waste" situation following the FTX debacle.

Why should crypto be exempt from the regulations applied to other financial institutions?

because cash is a dying animal and without it we have zero privacy.

In that case, shouldn't we get rid of money laundering regulations for all financial institutions? That would (presumably) provide even more privacy; there's no reason to make crypto an exception.

yep, this should happen

I accept your terms.

Why should hot dog vendors be exempt from regulations applied to financial institutions? Answer: because they're not financial institutions. Neither are bitcoin miners or proof-of-stake validators.

Centralized exchanges like FTX, on the other hand, absolutely should be subject to those regulations. But in the US they pretty much already are. FTX was in the Bahamas.

Yeah I agree. She was still my pick for dem candidate for president (full disclosure). I think they are trying to ban anything they can't trace. E. Warren in particular likes regulating banks and wall street.

I agree, fast forward a decade or two from now, and anything you can't trace/undo is illegal.

Not sure having a centralized monopoly on financial power is a net good thing for society.

Then again, if the crypto space has taught us anything, it's that Wall St. isn't nearly as bad as we thought it was. Turns out there are bigger villains in the world than Goldman Sachs.

Part of the social contract is that we allow the government to have a monopoly on the use of force. Maybe that should extend to a monopoly on commerce. Which one is the lesser of two evils here?

There's no such thing as a social contract, such an idea is preposterous, and to advocate for it is creepy.

Bear in mind that Sam Bankman-Fried was a Wall Street guy before he started his exchange. Could be why so many other Wall Street guys trusted him with their money.

A centralized monopoly on financial power hasn't been around since Nixon's days, if not prior. Once we left the gold standard and the Eurodollar market came about with unregulated cashless reserveless systems operating outside of the US responsible for more creation of credit (aka "money") than happens inside the US, the Federal Reserve has been demoted to puppetmaster in chief for a puppet show that keeps the plebs from panicking at the though that nobody is actually remotely in control of the monetary system, and that instability has been and will be doing nothing but grow as time goes on.

The fun part is, they keep taking tips on how to manage a crisis from a country that has been in a state of financial crisis for the better part of 30 years -- Japan. You'd think after decades of dozens of rounds of QE and actually seeing their currency DEFLATE they'd take a hint that maybe it's time to rethink how we actually think about and approach the monetary system, but I'm sure not holding my breath at this point.

It's also scary in that you can extend the premise of knowing the identity of all financial transactions, to anything that obfuscates identity. It wouldn't surprise me if Warren and the other anti-freedom nutters would argue for banning public key encryption, or enforce all key pair generations to be registered with some central database.

Since it's trivial to write the code to generate your own key pair - there might be a law, but like a lot of laws - it wouldn't actually have much impact and it would potentially have a ton of very negative side effects.

Fortunately, public key crypto already had its big fight with the government, and now it's established that cryptographic source code is protected speech under the First Amendment. (Bernstein vs US)

"shall promulgate a rule that prohibits financial institutions from— (1) handling, using, or transacting business with digital asset mixers, privacy coins, and other anonymity-enhancing technologies, as specified by 6 the Secretary"

Essentially, Warren and other privacy violating nutters want the identity of every crypto transaction. One can argue this is to curtail "laundering" at the tradeoff of privacy violation. Should every cash transaction also involve some receipt or the government will deem the transaction illegal? Will "cash only" businesses become illegal?

It seems like Warren still has similar views to many privacy violating politicians and administrators in the Bush administration...

The cypherpunks have been preparing for senator Karen for their entire life.

She really hates "anonymity-enhancing technologies". It's not your money, it's a tool for leverage. Anything outside of the CBDC system is a threat.

She's always been on the side of the administrative managerial class. The Progressive stuff was always a marketing strategy.

I don't think so, she is very liberal on personal freedoms unlike the current iteration of the republican party; however she obviously is a bit of a nerd and has an axe to grind with banks and wall street.

If she were consistent about those values, she'd write a bill that tightens regulations on centralized exchanges instead of on individuals running validators in their bedrooms. Either her values aren't what you think, or she's put zero effort into learning anything about the technology she's trying to regulate.

Ironic since the first time I heard about her was from conservative homeschooling types who were big fans of her due to her book 'The Two Income Trap'.

She never introduced a bill to codify abortion before Roe was overturned instead of using it for fundraising. She supported Hillary even when she supported the no-bankruptcy bill on student loans. Again, it's only for marketing.

Is money laundering with crypto even a large percentage of it? A public fully traceable blockchain isn’t great at that…

https://cryptoslate.com/money-laundering-0-05-of-all-crypto-...

Every exchange has kyc rules. Sure people can fake the kyc but we are splitting hairs here.

We absolutely have to have crypto to avoid the dark maelstrom that is CBDCs.

https://www.finextra.com/blogposting/21584/the-risks-to-soci...

No the vast majority of money laundering is cash. CBDCs will be used to fight that in the next 20 years.

I mean, obviously that's true.

The question isn't "is a large percentage of money laundering done through crypto?"

It's "is a large percentage of the traffic of crypto money laundering?"

Proposed bills usually don't come to much, so generally it's better to wait for a more substantial story for a thread.

https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...

I did not read the bill, either, but I am very worried that all those contributions by SBF haven't swayed the Democrats at all! Does she hate all red blooded Americans or just cryptocurrency enthusiasts, I can't decide! Either way, I'm upset and you should be too.

I did not read this bill, but I am vey worried that regulating it will bring crypto into the fold of regular financial markets/constructs and the government will bail out any perpetrators of fraud or mismanagement, like SBF, going forward. We have collectively lost the ability to say you screwed up and so you suffer the consequences and instead bail out collective failures of corporations. The larger the failure the higher the chance of bail out. I honestly don't see any value in crypto, am not alone in that, and unless that changes I don't want it to brought up to par with USD based constructs.

I should add that I would like to be educated if I am wrong in this thought process.

> government will bail out any perpetrators of fraud

What’s an example where this happened in the past?

i’m sure you can think of one if you try

> the government will bail out any perpetrators of fraud or mismanagement, like SBF, going forward.

The US government bails out very few financial institutions.

https://www.fdic.gov/resources/resolutions/bank-failures/fai...

It isn't clear to me that regulations could or would cause that. Or that not being regulated would prevent it.

FDIC / SIPC type protections would be beneficial to consumers in cases like FTX. I'm guessing if a crypto version of those things existed, FTX would have massively failed to secure membership since by all accounts it was outright fraud. And if they did, US consumers would receive some portion of their funds back.

I think things like ethereum could have real value but as long as the landscape is littered with rugpulls and ponzi schemes I don't think it will realize that potential.

Warren should propose a bill that outlaws government workers stealing from taxpayers ... and paying their salaries through letting the Fed inflate away the value of the US dollar.

when she claimed to be a Native American I just can't take her seriously

I don't see how this is being spun as a bad thing. The devil is in the details, but this has been a long time coming.

You don't get to do business with Americans but not follow American law. If companies don't want to abide by the new regulations, they're free to continue doing business offshore. If you don't want to play by the rules by all means setup shop in another country that will accept you.

Story as I understand it so far

  - Gullible Americans invest in shady "line-go-up" businesses that exist outside of established legal framework
  - Gullible Americans lose massive amounts of money due to systemic fraud and have no recourse for legal action
  - Gullible Americans complain to US government
  - US Government, doing it's job, passes laws setting up new rules and regulations for safely doing crypto business with Gullible Americans (KYC etc)
  - Gullible Americans now have legal recourse, but find that the crypto space isn't nearly as magical as it was before.
  - Many of these Gullible Americans now decide go to the casino instead, or get in on that traditional MLM scheme their friend kept pitching them that now sounds great.
  - A smaller number continue to send $$$ to shady overseas entities, hoping that more $$$ eventually come back, and complaining to everyone when it doesn't, but no one listens this time.

A fool and his money are soon parted. Meet me in the back alley at midnight, I have a bridge to sell you. Unregulated finance should be treated the same as a back alley deal, good luck to you.

What's the issue here?

I agree that central exchanges should be regulated, and in the US they are. If the US can get foreign exchanges to behave, so much the better.

The issue is classifying an individual running a small miner/validator in their bedroom as a money service business (Sec 3(a) in the bill), requiring them to do the impossible by collecting KYC on whatever transactions cross the network.

KYC is indeed burdensome.

But laws on money laundering being what they are, you can't claim ignorance. There's a minimum standard to be met when handling money in aggregate. If you don't know your customer, how do you know you aren't part of the problem?

Criminal organizations are great at hiding finances by exploiting loopholes at scale, and unregulated crypto is one hell of a loophole. The laws are setup to get everyone up and down the criminal chain-of-command, guilt by association. It's a good thing that criminals have a hard time finding financial institutions that will take their ill-gotten gains.

Unfortunately there is no semi-safe DMZ between highly-regulated and unregulated finance. It's pretty much binary. Regulated finance continues to grow until it touches everything legit, everything else gravitates to shadow overseas/back-alley finance.

It's not "burdensome," it's impossible, because they are not businesses handling money for customers, they're regular people running an internet protocol. They don't, for example, ever take custody of anyone else's money.

Requiring KYC of businesses who do take custody of other people's money is something we do already, even in crypto.

If you've constructed your financial system such that it relies on individuals running small miners/validators in their bedroom as integral parts of the system...

...then they get to be regulated as part of a financial system. Because that's what they are. You don't get to evade regulations just by going, "but, but, but, think of the poor individual who just wants to run a tiny little miner!" when that individual is, in however small a way, directly contributing to a system that, in practice, exists primarily to enable fraud and money laundering.

Arrest people for fraud and theft, then. The medium through which their transactions flow isn't the problem.

When you create a medium that invites fraud and theft, and it isn't regulated properly, there's too much crime to expect the proper authorities to be able to handle in a timely manner.

If regulating the new medium the same ways as the old medium, for the same reasons, destroys the value proposition of the new medium...then the value proposition was only ever evading regulation to start with.

That is to say, crime.

If the medium was created to avoid specific risks that are introduced by "proper authorities" for the depraved benefit those authorities, then asking for the proper authorities to cripple that medium invites further depravity from the authorities.

If theft and fraud are rampant within a certain medium, people will learn to use it in ways that they can't be defrauded or robbed from, or it will whither on its own.

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