US government removes two crypto AML rules from national defense bill

The United States government has removed two provisions from the National Defense Authorization Act (NDAA) that were intended to address anti-money laundering (AML) concerns involving cryptocurrency.

The NDAA is legislation that authorizes how the nation’s Department of Defense can use federal funding. Among the long list of provisions removed from the NDAA, two of them specifically outlined a system for in-depth review and reporting of crypto activities to combat illicit practices.

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National Defense Authorization Act Conference Report. Source: US Senate Committee on Armed Services

The first provision mandated the U.S. Treasury Secretary to coordinate with banking and government regulators to establish a risk-based crypto examination and review system for financial institutions.

The second provision related to combating anonymous transactions of crypto assets, particularly involving crypto mixers and cups.

This involved producing a report detailing crypto asset trading volumes linked to sanctioned entities. Additionally, the report would cover regulatory approaches taken by other jurisdictions.

Next, advice will be given to the US government on implementing crypto regulations:

“Recommendations for legislation or regulation relating to the technologies and services described in paragraphs (1) and (3).”

On July 28, Cointelegraph reported that the US Senate passed the NDAA worth $886 billion.

The crypto-related changes included elements of the Digital Assets Anti-Money Laundering Act, introduced in 2022, and the Responsible Financial Innovation Act, which aims to put in place precautions to avoid another FTX type incident in the industry.

This was proposed by a team of senators, including Cynthia Lummis, Elizabeth Warren, Kirsten Gillibrand and Roger Marshall.

Related: FinCEN Proposes Designating Cryptocurrency Mixers as Money Laundering Hubs

In recent times, the US government has been deliberating on issues related to money laundering and terrorist financing facilitated by the use of crypto.

The United States House of Representatives Committee on Financial Services met on November 15 to discuss illegal activities within the crypto ecosystem.

During the meeting, there was also a review of how crypto exchanges and decentralized finance providers are proactive in preventing money laundering and terrorist financing.

Magazine: Lawmakers’ Fear and Doubt Drive U.S. Crypto Regulatory Proposals