New U.S. Senate Bill Targets Bringing DeFi to Heel by Compliance

The proposed bill has received significant criticism from the crypto community.

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  • A bipartisan group of lawmakers has proposed new rules to regulate DeFi.
  • The proposed bill has received significant criticism from the crypto community.
  • The bill bears similarities to a previous effort from Senator Elizabeth Warren.

Regulations have become a hot topic in crypto in the last few years as the industry’s staying power and growth become more evident. 

However, crypto regulations are tough to crack as they require a delicate balancing act between ensuring investor protection, upholding international laws, and fostering innovation.

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As many jurisdictions scurry to rein in the fast-growing industry, a group of bipartisan lawmakers in the United States has proposed new rules to bring the decentralized finance (DeFi) sector under compliance. The proposed bill has, however, received pushback from the crypto community. 

DeFi Bill Sparks Anxiety and Backlash

On Wednesday, July 19, a cross-section of bipartisan lawmakers proposed the Crypto-Asset National Security Enhancement and Enforcement (CANSEE) Act to ensure that DeFi complies with anti-money laundering (AML) rules. A press statement on the proposed bill reveals that these lawmakers intend to regulate DeFi protocols and platforms that provide access to these protocols, like banks. 

In short, these platforms, like decentralized exchanges and wallet providers, would be held accountable for breaches of AML and sanctions rules on their platforms. Additionally, the bill suggests when it is not clear who controls the protocol, “anyone who invests more than $25 million in developing the project will be responsible for these obligations.”

While the full bill has yet to be published, it has already received significant backlash from the crypto community. 

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ConsenSys lawyer Bill Hughes described CANSEE as a “doozy.” He highlighted that the bill placed impractical requirements on these platforms and likened it to a “de facto ban.” Hughes further cautioned that the actions of malicious actors like the North Korean state-sponsored Lazarus group could ensure that bills like this eventually get enough support to pass.

Similarly, CoinCenter bashed the bill as “messy, arbitrary, and unconstitutional,” supporting Hughes’ view that the bill was an effective ban.

The available information shows that the bill proposed by Senators Jack Reed, Mike Rounds, Mark Warner, and Mitt Romney is similar to the Digital Asset Sanctions Compliance Enhancement Act proposed by Senator Elizabeth Warren in March 2022. Reed and Warner were signatories to the Warren bill.

On the Flipside

  • The official draft of the bill has yet to be publicly available.
  • Lawmakers do not plan to work on the bill this year.

Why This Matters

The lack of clear crypto guidelines and continued enforcement actions have made the U.S. untenable for many crypto firms. Bills like CANSEE only add to growing anxiety.

Find out why Chainalysis’ Policy Head believes that crypto faces the threat of an informal ban in the U.S.:

U.S. Faces Real Threat of Crypto “Ban by Enforcement:” Chainalysis Policy Head

Learn about Moxy’s plan to revolutionize esports:

Moxy’s Plan to Revolutionize Esports with Blockchain Tech

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Okoya David

David Okoya is a crypto news reporter at DailyCoin based in Nigeria. He covers various topics related to the cryptocurrency industry, including exchanges, regulations, and price movements, and strives to bring fresh angles to breaking news. With experience as a freelance crypto news writer, David upholds the highest journalistic standards, telling complete stories and answering lingering questions whenever possible.