US house representative passes new bill targeting crypto-related illicit finance

The US House of Representatives has approved a new cryptocurrency bill aimed at curbing its use for illegal finance.

Introduced by Representative Zach Nunn (R-Iowa) on Monday, July 22, the legislation seeks to establish a governmental working group to assess the use of cryptocurrency in terrorism and money laundering activities.

This bipartisan effort is designed to enhance public-private collaboration in addressing illicit finance within the digital asset space.

As cryptocurrencies increasingly become a prevalent method of payment, Rep. Nunn emphasized the necessity to provide Americans with secure access while safeguarding them from security risks and illicit financial activities.

“This bipartisan bill will help ensure the United States is prepared to address security risks and prevent illicit money laundering while also protecting consumer choice for all Americans,” said Rep. Nunn.

He also outlined the importance of addressing these challenges collectively to “ensure the long-term integrity of digital assets.”

The bill also reflects broader, sector-friendly initiatives previously seen in the House, such as the Financial Innovation and Technology for the 21st Century Act (FIT21).

However, the Senate has yet to show similar levels of enthusiasm towards crypto-related legislation.

In a speech on the House floor, Nunn described the legislation as “crucial in strengthening America’s national security” and vital for “protecting [the nation’s] digital assets and ensuring the next generation of financial and internet technology is built right here in America.”

The proposed working group, which would operate under the Treasury Department, aims to include experts from various sectors, including blockchain intelligence, research institutions, and fintech companies.

Their goal would be to explore crypto transactions and strategies to deter exploitation by malicious actors.

According to Jaret Seiberg, an analyst at TD Cowen, the bill serves as a response to crypto critics who have called for tougher measures on money laundering. He suggests that this legislative move provides political leverage to counter criticisms directed at the crypto industry.

Additionally, the bill’s introduction coincides with proactive industry efforts to garner support from Vice President Kamala Harris, especially after President Joe Biden announced his non-participation in the 2024 Presidential race.

Earlier in April 2023, the U.S. Department of the Treasury highlighted in a report the vulnerabilities in decentralized finance (defi) that criminals exploit to move and launder illicit funds.

These include the failure of many defi services to comply with anti-money laundering and counter-terrorism financing regulations, alongside weak cybersecurity measures in some services and insufficient regulatory frameworks in certain jurisdictions.

Reports from October also indicated that cryptocurrency might have facilitated funding for the Hamas attack on Israel, illustrating how such transactions can circumvent conventional banking systems.