The US Senate recently passed a $886 billion Military Spending Bill which includes provisions aimed at addressing the cryptocurrency industry. The 2024 National Defense Authorization Act (NDAA) approved the defense amount for 2024 and recognized the vulnerability of the crypto sector to illegal activities and financing terrorism.

The bill, introduced by Senators Kirsten Gillibrand, Cynthia Lummis, Elizabeth Warren, and Roger Marshall, is closely tied to a previous version passed by the House of Representatives on July 14, 2023. It incorporates provisions from the 2023 Lummis-Gillibrand Responsible Financial Innovation Act and draws extensively from the Digital Asset Anti-Money Laundering Act.

Cryptocurrencies are increasingly being exploited for criminal activities such as money laundering, tax evasion, and the funding of terrorist organizations due to the anonymity they provide. The new Senate bill addresses these concerns, particularly in relation to national security and terrorist financing.

One significant measure of the legislation grants the Secretary of the Treasury the authority to define examination requirements for crypto assets. This step will assist in assessing risks and resolving issues surrounding anonymous crypto transactions.

The bill’s focus is to restrain the use of cryptocurrency mixers, also known as tumblers. These tools pool crypto from various sources before redistributing them, effectively concealing their origins and transactions. The difficulty in tracing and monitoring crypto transactions via mixers has raised concerns among lawmakers.

Senator Lummis, who supports the crypto industry, stated, “Cracking down on illicit finance in the crypto asset industry is essential for weeding out bad actors and ensuring crypto assets are not used to evade sanctions and fund terrorism.”

The bill moves into the negotiation phase between the Senate and the House, where a version that can be passed by both chambers will be determined. It is not uncommon for non-defense-related amendments to be included in military bills. In fact, the House had already passed its own version, the Financial Innovation Technology for the 21st Century Act, earlier on.

While the provision within the Senate military bill may not cover the entire crypto industry, it is the first piece of legislation to offer some much-needed regulatory clarity in the US. The crypto industry has experienced regulatory uncertainty, causing it to lag behind in comparison to regions with more established regulations.

As the new bill progresses through the legislative process, the US crypto industry eagerly anticipates the final outcome, hoping for a comprehensive framework that supports growth and innovation while effectively addressing illicit practices within the sector.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The NFT and cryptocurrency market is highly volatile, and readers should conduct thorough research before making any investment decisions.