A group of four senators, representing both Democratic and Republican parties, introduced the Crypto-Asset National Security Enhancement and Enforcement (CANSEE) Bill in the United States Senate on Wednesday. The primary aim of this bill is to impose anti-money laundering (AML) and economic sanctions compliance requirements on decentralized finance (DeFi) services, bringing them in line with the same obligations applied to traditional banks, securities brokerages, and centralized crypto exchanges like Binance and Coinbase.
Sponsored by Democratic Senator Jack Reed, the CANSEE bill received support from fellow Democrat Mark Warner and Republican lawmakers Mike Rounds and Mitt Romney. Beyond addressing DeFi concerns, the bill also seeks to strengthen the capabilities of public authorities under the US Treasury Department to combat money laundering threats, as the current limitations restrict their scope to transactions conducted within the conventional banking system.
One key provision of the CANSEE bill pertains to crypto ‘kiosks‘ or Automated Teller Machine operators, who will be required to verify the identities of individuals engaging in crypto exchange activities on their platforms. This measure aims to enhance the traceability of funds. DeFi platforms operate as blockchain-based applications, facilitating peer-to-peer financial transactions. However, the senators highlighted that criminals exploit the anonymity offered by DeFi platforms and gaps in the existing AML regulatory framework to launder illicit proceeds and finance further criminal activities.
The CANSEE Bill is a response to growing concerns about the potential misuse of DeFi platforms for illicit purposes, advocating an end to any perceived ‘special treatment’ for the sector. The proposed regulations intend to foster a safer and more transparent cryptocurrency ecosystem by holding all crypto service providers to the same standards of compliance and accountability as traditional financial institutions.
The legislators pointed out that these requirements will effectively close off a lucrative avenue for money laundering, which has been persistently exploited in recent months by various illicit actors such as the North Korean government, Chinese chemicals manufacturers, Mexican drug cartels, cybercriminals, ransomware attackers, scammers, and other malicious entities.
“The CANSEE Bill aims to put an end to the perceived ‘special treatment’ given to DeFi platforms. The proposed legislation includes specific provisions that mandate DeFi platforms to “meet basic obligations, most notably to maintain AML programs, conduct due diligence on their customers, and report suspicious transactions to the Financial Crimes Enforcement Network (FinCEN)”, the legislators added.
The legislation also explicitly states that in case a sanctioned individual, like a Russian oligarch, attempts to exploit a DeFi service to evade U.S. sanctions, those in control of the project will be held accountable for facilitating the violation, they further elaborated. “If nobody controls a DeFi service, then — as a backstop — anyone who invests more than $25 million in developing the project will be responsible for these obligations.”