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

The US House of Representatives has approved a new bill that aims to curb the illicit financial use of cryptocurrencies.

The bill, introduced by Representative Zach Nunn (R-Iowa) on Monday, July 22, seeks to establish a government working group to evaluate the use of cryptocurrencies in terrorism and money laundering activities.

This bipartisan effort is designed to increase public-private collaboration in combating illicit finance in the digital asset space.

As cryptocurrencies become an increasingly common method of payment, Representative Nunn emphasized the need to provide Americans with safe access and protect them from security risks and illicit financial activity.

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

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

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

However, it appears that the Senate has yet to show the same level of enthusiasm for crypto-related legislation.

In his speech on the House floor, Nunn described the bill as “vital to strengthening America’s national security” and “vital to its preservation.” [the nation’s] “Ensuring that digital assets and the next generation of financial and internet technology are built right here in America.”

The working group, which is planned to operate under the Ministry of Treasury, is aimed to include experts from various sectors, including blockchain intelligence, research institutions and fintech companies.

Their goal will be to discover cryptocurrency transactions and strategies to prevent abuse by malicious actors.

The bill is a response to crypto critics who have been calling for tougher measures against money laundering, according to Jaret Seiberg, an analyst at TD Cowen, who argues that the legislative move provides political leverage to counter criticism of the crypto industry.

Additionally, the bill’s introduction coincides with the industry’s proactive efforts to enlist the support of Vice President Kamala Harris, especially after President Joe Biden announced that he would not enter the 2024 presidential race.

The U.S. Treasury Department highlighted vulnerabilities in decentralized finance (DEFI) that criminals use to move and launder illicit funds in a report published in early April 2023.

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

Reports from October also suggested that cryptocurrencies may have facilitated the financing of Hamas’ attack on Israel, and outlined how such transactions can bypass traditional banking systems.