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.
Paradigm’s chief legal officer and general counsel said if Roman Storm is found guilty, it could slow future software development in the crypto and fintech industries.
Flawed data has been used repeatedly to dismiss claims about “Asian grooming gangs”, Baroness Louise Casey has said in a new report, as she called for a new national inquiry.
The government has accepted her recommendations to introduce compulsory collection of ethnicity and nationality data for all suspects in grooming cases, and for a review of police records to launch new criminal investigations into historical child sexual exploitation cases.
Image: Baroness Louise Casey carried out the review. Pic: PA
The crossbench peer has produced an audit of sexual abuse carried out by grooming gangs in England and Wales, after she was asked by the prime minister to review new and existing data, including the ethnicity and demographics of these gangs.
In her report, she has warned authorities that children need to be seen “as children” and called for a tightening of the laws around the age of consent so that any penetrative sexual activity with a child under 16 is classified as rape. This is “to reduce uncertainty which adults can exploit to avoid or reduce the punishments that should be imposed for their crimes”, she added.
Baroness Casey said: “Despite the age of consent being 16, we have found too many examples of child sexual exploitation criminal cases being dropped or downgraded from rape to lesser charges where a 13 to 15-year-old had been ‘in love with’ or ‘had consented to’ sex with the perpetrator.”
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3:18
Grooming gangs victim speaks out
The peer has called for a nationwide probe into the exploitation of children by gangs of men.
She has not recommended another over-arching inquiry of the kind conducted by Professor Alexis Jay, and suggests the national probe should be time-limited.
The national inquiry will direct local investigations and hold institutions to account for past failures.
Home Secretary Yvette Cooper said the inquiry’s “purpose is to challenge what the audit describes as continued denial, resistance and legal wrangling among local agencies”.
On the issue of ethnicity, Baroness Casey said police data was not sufficient to draw conclusions as it had been “shied away from”, and is still not recorded for two-thirds of perpetrators.
‘Flawed data’
However, having examined local data in three police force areas, she found “disproportionate numbers of men from Asian ethnic backgrounds amongst suspects for group-based child sexual exploitation, as well as in the significant number of perpetrators of Asian ethnicity identified in local reviews and high-profile child sexual exploitation prosecutions across the country, to at least warrant further examination”.
She added: “Despite reviews, reports and inquiries raising questions about men from Asian or Pakistani backgrounds grooming and sexually exploiting young white girls, the system has consistently failed to fully acknowledge this or collect accurate data so it can be examined effectively.
“Instead, flawed data is used repeatedly to dismiss claims about ‘Asian grooming gangs’ as sensationalised, biased or untrue.
“This does a disservice to victims and indeed all law-abiding people in Asian communities and plays into the hands of those who want to exploit it to sow division.”
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3:07
From January: Grooming gangs: What happened?
The baroness hit out at the failure of policing data and intelligence for having multiple systems which do not communicate with each other.
She also criticised “an ambivalent attitude to adolescent girls both in society and in the culture of many organisations”, too often judging them as adults.
‘Deep-rooted failure’
Responding to Baroness Casey’s review, Ms Yvette Cooper told the House of Commons: “The findings of her audit are damning.
“At its heart, she identifies a deep-rooted failure to treat children as children. A continued failure to protect children and teenage girls from rape, from exploitation, and serious violence.
She added: “Baroness Casey found ‘blindness, ignorance, prejudice, defensiveness and even good but misdirected intentions’ all played a part in this collective failure.”
Ms Cooper said she will take immediate action on all 12 recommendations from the report, adding: “We cannot afford more wasted years repeating the same mistakes or shouting at each other across this House rather than delivering real change.”
Image: Home Secretary Yvette Cooper responded to the report. Pic: PA
Conservative leader Kemi Badenoch said: “After months of pressure, the prime minister has finally accepted our calls for a full statutory national inquiry into the grooming gangs.
“We must remember that this is not a victory for politicians, especially the ones like the home secretary, who had to be dragged to this position, or the prime minister. This is a victory for the survivors who have been calling for this for years.”
Ms Badenoch added: “The prime minister’s handling of this scandal is an extraordinary failure of leadership. His judgement has once again been found wanting.
“Since he became prime minister, he and the home secretary dismissed calls for an inquiry because they did not want to cause a stir.
“They accused those of us demanding justice for the victims of this scandal as, and I quote, ‘jumping on a far right bandwagon’, a claim the prime minister’s official spokesman restated this weekend – shameful.”
The government has promised new laws to protect children and support victims so they “stop being blamed for the crimes committed against them”.
The crypto community is missing the opportunity to reimagine rather than transpose rulemaking for financial services. More technologists must join the regulatory conversation.