Global civil society organization Transparency International U.S. has recently raised concerns about the crypto market structure legislation awaiting approval from Capitol Hill. In a letter addressed to U.S. Senator Majority Leader John Thune and Senator Charles Schumer, Transparency International highlighted its worries regarding the Digital Asset Market Clarity Act (CLARITY Act) and the Responsible Financial Innovation Act (RFIA).
Transparency International, along with the Free Russia Foundation, Financial Accountability and Corporate Transparency Coalition, and Nate Sibley, the director of the Hudson Institute’s Kleptocracy Initiative, emphasized the risks associated with the RFIA bill. The organization stressed the importance of incorporating measures in digital asset legislation to combat money laundering and sanctions evasion, as well as other illicit activities.
The letter pointed out the increasing use of virtual assets for laundering proceeds of corruption, such as bribery and embezzlement. An example cited in the letter was Tareck El Aissami, a Venezuelan official accused of embezzling state funds and laundering them through U.S. crypto exchanges. Scott Greytak, Deputy Executive Director of Transparency International U.S., warned that the current crypto laws’ blind spots could enable drug cartels, traffickers, and corrupt regimes to move dirty money anonymously and fund criminal activities.
In response to the concerns raised by Transparency International, U.S. policymakers have emphasized the need for stricter regulatory measures for cryptocurrencies. The market structure framework proposed by Senate Democrats underscores the potential financial crisis posed by the high volatility of most digital assets under the RFIA.
Patrick Witt, the newly appointed executive director of the President’s Council of Advisors on Digital Assets, has urged Congress to expedite the cryptocurrency market structure legislation. He emphasized the importance of implementing AML measures on decentralized crypto platforms to prevent illicit activities.
The letter from Transparency International also advocated for the elimination of loopholes for crypto mixers, like Tornado Cash, which have been linked to criminal activities. The organization urged that any final legislation should ensure that crypto platforms serving U.S. customers comply with U.S. sanctions and AML/CFT requirements.
Additionally, the authors acknowledged the importance of creating a level playing field for stablecoin issuers. They called for all stablecoin issuers to implement ecosystem-wide monitoring to protect investors and prevent illicit financial activities. The GENIUS Act, which became law in July, prohibits stablecoin issuers from offering any yield or interest on holdings to ensure fair legislation for exchanges and affiliates.
The crypto industry views the stablecoin legislation as a step towards fairness, allowing exchanges and affiliates to pay interest to holders. However, banks have called for amendments to the legislation to close loopholes and ensure a level playing field. Despite differing perspectives on the issue, the ongoing dialogue reflects the evolving landscape of cryptocurrency regulation and the need for comprehensive measures to address emerging risks.