Could the U.S. start imposing sanctions against crypto exchanges?

A new bill introduced in the United States gives Biden broad powers to block access to digital assets.

On June 5, Senator Mark Warner’s strategic amendment to the Intelligence Authorization Act for Fiscal Year 2025 was published in X. The law provides the US president with sweeping new powers regarding digital assets.

What is known about the new draft law?

The bill, known as S.4443, was introduced to the U.S. Senate on June 3. It ensures the approval of funding and the granting of legal authority to the U.S. intelligence community.

The new proposal has already caused great concern among the crypto community. According to the latest amendment to the bill, the president can block transactions between US individuals and foreign organizations determined to support terrorist organizations. For example, prohibit any transaction between any person subject to American jurisdiction and a foreign crypto intermediary.

What does the cryptocurrency community say?

Fiscal lawyer Scott Johnsson criticized the law for its broad scope. He said S.4443 means the president can impose a user-level ban on any protocol or smart contract.

It’s hard to understand why this isn’t intended as a user-level ban authority by the President on any protocol/smart contract deemed “controlled, operated, or operated” by the Secretary of the Treasury. [made] “Present” by the violator of a foreign sanction. Breathtaking scope and implications… https://t.co/i36gE79lIM

— Scott Johnsson (@SGJohnsson) June 6, 2024

Johnsson thinks the law could restrict users to regulated KYC-compliant blockchains. Since Warner’s amendments are borrowed from the Anti-Terrorism Financing Act, he sees it as an attempt to strengthen control over digital assets under the guise of fighting terrorism.

Current regulation of crypto exchanges in the US

In March 2013, the Financial Crimes Enforcement Network (FinCEN) classified crypto exchanges as money services businesses that require the collection of customer identification information. Since then, US crypto platforms have been required to verify the identities of their users before accessing trading.

How crypto exchanges work in the USA

To register on a crypto exchange in America, one must comply with various conditions and the issued token can then be considered a security or currency. Legal regulation of cryptocurrency in the United States depends on federal legislation and the legislation of each state.

Additionally, US citizens or residents must use local exchanges in accordance with FinCEN regulations. Attempting to use international platforms may result in trading or registration being banned if someone is detected using a US IP address.

Given these regulations and the security risks associated with currencies, US investors are advised to conduct cryptocurrency transactions through local platforms.

Regulatory laws

Digital currency businesses must comply with the Bank Secrecy Act (BSA). Depending on their operations, they must register with the appropriate federal agencies such as FinCEN, the Securities and Exchange Commission (SEC), or the Commodity Futures Trading Commission (CFTC).

To ensure compliance, these organizations are required to conduct comprehensive risk assessments to assess their exposure to money laundering and develop robust AML programs tailored to their risk profiles. These programs should include comprehensive policies, procedures, controls, independent compliance testing, dedicated compliance personnel, and ongoing training.

The US has become sharply concerned about the crypto industry

The intersection of digital assets and politics could significantly impact the 2024 US presidential election. As digital assets gain popularity, candidates’ stances on crypto regulations and blockchain innovation could influence voters.

The impact of crypto politics on the US presidential election will be more critical than ever. This is the first election in which leading candidates have actively discussed cryptocurrency, despite its minor role in previous campaigns in which Andrew Yang took office.

For example, former American president Donald Trump began accepting crypto donations for his campaign last month, giving crypto industry advocates, including Messari CEO Ryan Selkis, a platform to voice their beliefs.

Source: Donald Trump’s website

At the same time, current US President Joe Biden, whose administration had previously not been loyal to digital assets, abruptly changed his cryptocurrency policy.

After Trump’s election campaign portrayed cryptocurrencies positively, the president’s attitude changed. Since then, Democratic members of Congress have voted in favor of cryptocurrency, and the presidential campaign is seeking policy guidance by reaching out to industry insiders and cryptocurrency experts.

Will the bill be approved?

Given the upcoming elections, regulation of the cryptocurrency industry is becoming increasingly important for the current administration. But as the crypto community has become an indispensable part of the electorate, it is not profitable to ignore their interests.

The issue of waiving the provision regarding crypto exchanges and sanctions remains open. It will likely require further refinement before lawmakers make a final decision.