US House Approves Bill to Tackle Crypto-Related Illicit Finance

The US House of Representatives has approved a significant new bill targeting the use of cryptocurrency for illegal finance activities. Introduced by Representative Zach Nunn (R-Iowa) on July 22, the legislation aims to establish a governmental working group to assess and mitigate the use of digital assets in terrorism and money laundering.

This bipartisan initiative is designed to foster collaboration between public and private sectors to address the growing concern of illicit finance within the cryptocurrency space. As digital currencies become increasingly common as payment methods, Rep. Nunn stressed the importance of providing Americans with secure access while protecting them from security threats and financial crimes.

“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,” stated Rep. Nunn. He emphasized the need for a collective approach to maintaining the long-term integrity of digital assets.

The bill mirrors other sector-friendly efforts previously introduced in the House, such as the Financial Innovation and Technology for the 21st Century Act (FIT21). However, similar enthusiasm for crypto-related legislation has yet to be seen in the Senate.

In his address on the House floor, Nunn described the legislation as “crucial in strengthening America’s national security” and essential 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, operating under the Treasury Department, aims to include experts from blockchain intelligence, research institutions, and fintech companies. Their goal is to investigate crypto transactions and develop strategies to prevent exploitation by malicious actors.

Jaret Seiberg, an analyst at TD Cowen, views the bill as a strategic response to critics demanding stricter measures on money laundering in the crypto industry. He suggests that this legislative move provides political leverage to counteract criticisms of the sector.

The bill’s introduction aligns with proactive industry efforts to gain support from Vice President Kamala Harris, especially following President Joe Biden’s announcement of his non-participation in the 2024 Presidential race.

In April 2023, the U.S. Department of the Treasury reported vulnerabilities in decentralized finance (DeFi) that criminals exploit to launder illicit funds. These vulnerabilities include non-compliance with anti-money laundering and counter-terrorism financing regulations, weak cybersecurity measures, and insufficient regulatory frameworks in various jurisdictions.

Furthermore, reports from October indicated that cryptocurrency might have facilitated funding for the Hamas attack on Israel, showcasing how digital transactions can circumvent traditional banking systems.

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