Senate’s $886B Defense Bill Ropes in Crypto Mixers, Privacy Coins

Crypto mixers and privacy coins might be about to face a fresh crackdown in the U.S.

An amendment designed to tackle anonymous transactions and illicit activity has been tacked on to the 2024 National Defense Authorization Act (NDAA.)

The $886 billion package has now been given the green light by the Senate—and saw lawmakers on both sides of the crypto debate become unusual bedfellows.

The NDAA is a massive piece of legislation that sets out the annual budget for the U.S. Department of Defense—and, as is the case here too, it often becomes a vessel for unrelated policies.

Wyoming Republican Cynthia Lummis—often referred to as "the Bitcoin senator"—has been championing a positive approach to regulation with New York Democrat Kirsten Gillibrand. The proposed bill from the two Senators called the Responsible Financial Innovation Act, is one of the most comprehensive pieces of crypto legislation in the United States.

In a statement shared with Decrypt, Senator Gillibrand said “this amendment requires federal regulators to enact strong examination standards that will help prevent the utilization of cryptocurrencies in illegal activities. This is an important step in appropriately regulating crypto assets and I’m grateful to Senators Lummis, Warren and Marshall for their hard work on this legislation.”

The amendment approved on Thursday was achieved in conjunction with Elizabeth Warren and Roger Marshall, two lawmakers who have voiced staunch opposition to digital assets. The amendment also includes portions from their joint bill the Digital Asset Anti-Mondy Laundering Act.

Warren said in the same press release that “The most urgent problem in crypto today is its illicit use by rogue nations, ransomware gangs, drug traffickers, and cybercriminals."

The amendment includes key measures to monitor the use of "anonymity-enhancing technologies or services used in connection with crypto assets, such as mixers and tumblers." Beyond that, the Treasury is expected to submit a report estimating the "magnitude of transactions" related to such technologies and provide "recommendations for legislation or regulation" accordingly.

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Elizabeth Warren, the U.S. Senator from Massachusetts, has sounded the alarm on the use of crypto in funding the lethal fentanyl trade, prompting her to call for more stringent regulation of the industry. "This group sold enough precursor drugs in exchange for crypto to produce $540 billion worth of fentanyl pills. That is enough fentanyl to kill nearly 9 billion people, all paid for by crypto," Warren said Wednesday during a hearing at the Senate Banking Committee. During the same hearing, Eliz...

Under the provisions backed by all four politicians, federal regulators will be tasked with enforcing strong examination standards to prevent crypto from being used for illegal activities.

When their amendment was initially announced last week, Lummis said: "Preventing illicit finance in the crypto asset industry is an integral part of the Lummis-Gillibrand Responsible Financial Innovation Act, and I’m proud to join my colleagues in introducing an amendment to the NDAA to prevent money laundering and push bad actors out of this space."

Warren took a much harsher tone—and described digital assets as a "national security threat."

Crypto Industry 'Scared of a Strong SEC': Sen. Elizabeth Warren

Massachusetts Senator Elizabeth Warren had strong words for the crypto industry on Wednesday, calling on the U.S. Securities and Exchange Commission to do more to fight crypto fraud. In prepared remarks delivered before the American Economic Liberties Project, Warren said industry players are “scared of a strong SEC." “The SEC has brought enforcement actions against celebrity crypto promoters for not disclosing their compensation to the public. It has gone after the employees at exchanges like C...

"Crypto has become the illicit finance tool of choice for ransomware gangs, fentanyl traffickers, and rogue nations like North Korea," the Democratic senator for Massachusetts said. "Too many actors in the crypto ecosystem fail to comply with basic anti-money laundering standards."

And Marshall, a Kansas Republican, expressed hope that the amendment "will set commonsense standards to ensure that proper guardrails are in place as crypto use continues to grow across the world."

While its passage through the Senate is a significant milestone, this is only the start of what's shaping up to be a messy political battle.

The House of Representatives passed its own version of the NDAA earlier this month, which is significantly different, to say the least—featuring amendments that would restrict abortion and eliminate diversity programs.

Both chambers will now need to work together on establishing compromises and thrashing out a new version that both sides can agree on. This could mean that some amendments—such as the one targeting crypto mixers and privacy coins—may be stripped from the final text.