Although the measure has not yet been published and was introduced in the evening, it is already creating a commotion. Crypto Twitter refers to it as a “nonstarter.”
United States Senator Jack Reed has led a historic bipartisan effort to advance a game-changing bill that would tighten Know Your Customer (KYC) and Anti-Money Laundering (AML) rules for the decentralized finance (DeFi) sector. This law, known as the Crypto-Asset National Security Enhancement and Enforcement (CANSEE) Act, has the potential to change the way DeFi activities are carried out while also ensuring improved security and accountability in the crypto sector.
DeFi operations will be subject to the same stringent regulations as conventional financial institutions, centralized crypto trading platforms, casinos, and even pawn shops under the CANSEE Act. According to the law, anyone in charge of a DeFi initiative is responsible for any misuse by prohibited parties. Even in cases where no centralized control exists, investors who contribute over $25 million to a project will shoulder the responsibility for these obligations, acting as a safeguard to ensure compliance.
The capabilities of the Treasury Department must change along with the world of digital assets. The legislation aims to expand the Treasury Department’s AML power outside of the boundaries of the conventional financial system. It is crucial to provide the Treasury Department the authority to crack down on any illegal activity that might emerge outside of the traditional banking sector since emerging technologies, like cryptocurrencies, are opening up new channels for financial transactions.
Related: US Industry Watchdogs Oppose Crypto Bill, Citing Lack of Clarity
The CANSEE Act also addresses the expanding issue of money laundering using cryptocurrency ATMs. By requiring the identification of both parties to a transaction, the measure places new demands on kiosk operators. This action will strengthen the integrity of the crypto economy overall and tighten the screws on prospective money launderers.
The Crypto-Asset National Security Enhancement and Enforcement Act of 2023 defines "Control" as including the power, directly or indirectly, to direct a change in the code or other terms governing the protocol, through ownership of tokens, admin privileges, or other abilities. pic.twitter.com/tULgel1G6s
— Mr. Lawyer 🧁💦🍭🧊 (@BrandonFerrick) July 19, 2023
The CANSEE Act isn’t being welcomed by everyone, either. Mixed opinions have been expressed on cryptocurrency Twitter in response to the measure, with some people worrying that it could endanger DeFi’s existence and discourage venture capital investment. According to detractors, making investors accountable for projects costing more than $25 million might stifle innovation and dampen enthusiasm in the DeFi market.
However, Senator Reed maintains his position, supported by Senators Mike Rounds, Mark Warner, and Mitt Romney who have joined him in co-sponsoring this forward-thinking initiative.
Reed and Senator Warner have worked together on important issues before. They joined Senator Elizabeth Warren in co-sponsoring the Digital Asset Sanctions Compliance Enhancement Act in March 2022.
The future of DeFi is uncertain as the crypto community waits for the verdict. Will the CANSEE Act open the door for a DeFi environment that is safer and more regulated, or will it unintentionally hinder investor interest and innovation? The next step in the development of decentralized finance in the US will be determined by the response to this crucial question. Watch out for what appears to be a captivating drama in the world of digital assets.