Crypto industry advocacy bodies have slammed a newly proposed United States Senate bill for what they say is a confused approach to regulating the decentralized finance (DeFi) sector.
On July 20, crypto think tank Coin Center and crypto advocacy group the Blockchain Association released separate statements describing the legislation as a “messy,” “unworkable,” and “unconstitutional” way of regulating DeFi.
Introduced on July 18, the bipartisan Crypto-Asset National Security Enhancement Act (CANSEE) bill aims to reign in money laundering violations in DeFi.
If passed, the legislation would extend new penalties to anyone who “controls” or “makes available an application designed to facilitate transactions using a digital asset protocol.” They would also be required to adhere to anti-money laundering and financial reporting standards.
The definition of who or what “controls” a DeFi protocol was left to be made by the U.S. Secretary of the Treasury — a move some pundits say will lead to excessive controls being applied to DeFi.
In its July 20 blog post, Coin Center wrote the bill gives “virtually unbounded discretion to the Secretary to decide what it would take to designate one as having ‘control’ of a protocol.”
Additionally, the think tank declared the bill to be unconstitutional as it would crack down on software developers who — as an extension of free speech — have a First Amendment right to publish code.
Coin Center was also concerned with the scope of the legislation and said by design DeFi is decentralized — meaning it could prove legally troublesome to enforce control over a given protocol.
Kristin Smith, the CEO of the Blockchain Association echoed Coin Center’s concerns and described the new legislation as unworkable.
Blockchain Association CEO @KMSmithDC released the following statement following today’s introduction of the Crypto-Asset National Security Enhancement Act of 2023:
“The Crypto-Asset National Security Enhancement Act of 2023, introduced today by Sen. Jack Reed (D-RI), is an… pic.twitter.com/S65XSUheTW
— Blockchain Association (@BlockchainAssn) July 19, 2023
Smith took aim at the bill for overstating the presence of money laundering in DeFi and crypto more broadly.
“At present, illicit transactions represent a small fraction of total volume: only 0.24% of all digital asset transactions in 2022, far less than in traditional finance.”
Smith said federal law enforcement agencies are already equipped with the tools and expertise to combat this “relatively small but important issue.” Ultimately, Smith denounced the new punitive measures in the bill as redundant.
While crypto organizations have taken aim at the broad scope of the bill, an April 7 U.S. Treasury report found many DeFi protocols are more centralized than claimed, often featuring a high concentration of funds and voting power in the hands of a few token holders.
“In the past, the predominant threat was highly organised groups with clear political intent. Groups like al Qaeda. That threat, of course, remains,” he said.
“But now, alongside that, we also see acts of extreme violence perpetrated by loners, misfits, young men in their bedroom accessing all manner of material online, desperate for notoriety, sometimes inspired by traditional terrorist groups, but fixated on that extreme violence seeming only for its own sake.”
He added: “If a law needs to change to recognise this new and dangerous threat, then we will change it and quickly, and we will also review our entire counter-extremist system to make sure we have what we need to defeat it.”
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Southport murderer – what you need to know
The PM announced Sir David Anderson KC, an independent reviewer of terror legislation, has been appointed as the new independent commissioner for Prevent, the UK’s anti-extremism scheme.
After his guilty plea, it emerged Rudakubana was referred to the Prevent scheme three times in the 17 months before the attack over concerns about his fixation with violence but a judgement was made that he did not require intervention.
Sir Keir said the Southport killings “must be a line in the sand for Britain” and there must be “fundamental change” in how the country protects its children.
“The senseless barbaric murder of three young girls in Southport is a devastating moment in our history. No words come anywhere close to expressing the brutality and horror in this case,” he said.
Sir Keir said an inquiry was needed “because we are dealing with a new cohort, a new different threat, this individualised extreme violence”.
He said the government would not wait until the inquiry finished before making changes, adding: “We need to get on with the change in the meantime and to reassure the public that every step has been taken to protect their children.”
‘I would never disclose details that could collapse a trial’
The prime minister also said he knew Rudakubana was known to the authorities and referred to Prevent when the attacks happened, but he could not reveal that at the time because it risked collapsing the trial.
“The vile individual who committed these crimes would have walked away, a free man, the prospect of justice destroyed for the victims and their families,” he said.
“I would never do that, and nobody would ever forgive me if I had. That is why the law of this country forbade me or anyone else from disclosing details sooner.”
Following the killings, misinformation online, claiming the killer was an asylum seeker who had recently arrived by small boat, prompted riots across the UK.
Sir Keir’s critics accused him of a cover-up but the PM said if he had revealed Rudakubana’s background the only losers would have been the victims and their families.
But he admitted the state had failed to identify the teenager was a serious threat.
“There has been a failure here, and I don’t intend to let any institution of the state deflect from their failures,” he said.
A history of violence
On Monday, Rudakubana unexpectedly pleaded guilty to murdering Alice da Silva Aguiar, nine, Bebe King, six, and Elsie Dot Stancombe, seven, on 29 July last year on what was due to be the first day of his trial.
Rudakubana also admitted to 10 counts of attempted murder and possession of a kitchen knife during the attack in the Merseyside town.
A week before the attack, Rudakubana, then 17, booked a taxi to take him to his old school, Range High School in Formby, but his father stopped him from leaving, it is understood.
The teenager, who has been diagnosed with autism spectrum disorder, was expelled from the school in about 2019 over claims he was carrying a knife after telling Childline he was being racially bullied and brought the knife to protect himself.
It is understood that, after his exclusion, he returned to the school to target a former bully or someone he had a grievance with and assaulted someone with a hockey stick.
Rudakubana then attended two specialist schools, where teachers were concerned about his behaviour.