US Senator withdraws support for Elizabeth Warren's proposed crypto AML bill

U.S. Senator Roger Marshall, R-Kan. has withdrawn from a proposed crypto anti-money laundering bill he originally introduced with Sen. Elizabeth Warren, D-Mass.

Marshall pulled his support for the controversial Digital Asset Anti-Money Laundering Act of 2023 (DAAMLA) this week, becoming the first co-sponsor to do so, according to Congress legislative records . The bipartisan bill still has support from 18 co-sponsoring senators, however.

Warren and Marshall first introduced the bill in December 2022, designed to tighten U.S. anti-money laundering rules for digital assets. “The crypto industry should follow common-sense rules like banks, brokers and Western Union, and this legislation would ensure the same standards apply across similar financial transactions,” Warren said at the time.

The bill was reintroduced in July 2023, with backing from the Bank Policy Institute, which represents banking giants like Bank of America and Citibank. "Existing anti-money laundering and Bank Secrecy Act framework must account for digital assets, and we look forward to engaging in this process to defend our nation’s financial system against illicit finance in all its forms," the BPI stated.

The bill aims to expand know-your-customer and anti-money laundering verification responsibilities to digital asset service providers, miners, validators and other participants in efforts to close existing security loopholes in crypto.

A section of the anti-money laundering bill also proposes that the Treasury, Securities and Exchange Commission and Commodity Futures Trading Commission establish a new AML review process to enforce Bank Secrecy Act compliance on digital asset entities.

In January and February, the Blockchain Association, a nonprofit organization representing the interests of the U.S. crypto industry, wrote to Congress expressing concern over the bill. “[The bill] risks our nation’s strategic advantage, threatens tens of thousands of U.S. jobs, and bears little effect on the illicit actors it targets,” said one of the letters , co-signed by 80 former military and national security professionals, including those with background in digital assets. “Sen. Warren’s DAAMLA legislation would inadvertently hinder law enforcement and national security efforts by driving the majority of the digital asset industry overseas,” the Blockchain Association added.

Warren previously said that the Blockchain Association attempts to “undermine bipartisan efforts” in addressing the role of crypto terrorist financing after the association stated that the reporting on Hamas’ use of crypto has been “grossly overstated.”

The Block reached out to Sen. Marshall’s and Sen. Warren’s office for comment.

Crypto industry reaction

The crypto industry has long pushed back against Warren’s bill, suggesting it would be ineffective in decentralized finance and overregulation in the space would stifle innovation and drive the digital asset industry overseas more generally.

“After tremendous community pressure, Sen. Marshall has withdrawn his support for the Crypto Ban Bill S2669. This is a massive victory for our community! It's incredibly rare for a senator to back away from their own bill,” Perianne Boring, founder and CEO of the blockchain trade association, The Digital Chamber, said on Thursday.

“This is a bill we have been opposing for several years,” The Digital Chamber Chief Policy Officer Cody Carbone added . “It’s a backdoor ban on blockchain technology by creating impossible compliance requirements for miners, validators, etc.”

Boring also suggested that if one more Republican withdrew their support, Warren could no longer claim bipartisan support, urging Sen. Lindsey Graham, R-S.C. to do so.

“Great to see Senator Marshall withdraw his support from Warren’s digital asset anti money laundering act (DAAMLA),” Galaxy Head of Research Alex Thorn said . “This bill is a disaster that would criminalize software developers, nodes, miners and more.”

“Nothing more inspiring in crypto policy than seeing Members update their priors on crypto,” Paradigm VP of Government Affairs Alexander Grieve added . “Roger Marshall is the latest (and one of the most noteworthy) — yesterday literally UNsponsoring the DAAMLA bill he originally introed with Sen. Warren.”

Donald Trump’s pro-crypto stance vs Elizabeth Warren’s ‘anti-crypto army’

Anti-money laundering and terrorist financing involving crypto has been at the forefront among lawmakers as well as the Biden Administration in recent years, contrasting the newfound pro-crypto stance of Republican presidential nominee Donald Trump.

Last month, Kraken founder Jesse Powell said he had made a $1 million personal donation to presidential candidate Donald Trump in support of his pro-crypto stance. Powell also criticized the Biden Administration's regulatory approach toward crypto, citing Senator Elizabeth Warren and SEC Chair Gary Gensler as industry adversaries.

Sen. Warren, seeking her fourth term as a U.S. Senator, is known for her often critical stance on crypto and desire to build up an "anti-crypto army" as part of her re-election campaign, calling for a wide-ranging crackdown on illicit activity in the market and expansion of federal regulator authority to hold the industry to the same standards as traditional finance. In February, pro-crypto lawyer John Deaton officially made his bid for the U.S. Senate in Massachusetts to face off against Democrat Sen. Elizabeth Warren in the fall. 

SEC Chair Gensler has also been critical of the industry, with the regulator ramping up its enforcement action against crypto companies, including Kraken, under his tenure.

In contrast, Trump has shown strong support for crypto in recent months, despite previously being critical of the industry, accepting donations in cryptocurrencies and advocating for the rights of holders. He has also recently gained backing from Gemini's Winklevoss twins and Ark Invest CEO Cathie Wood.

Earlier this month, the Republican Party championed crypto as part of its official platform for the 2024 U.S. elections, vowing to end an “unlawful and un-American crackdown” on the U.S. crypto industry.  The platform includes promises to “defend the right to mine bitcoin” and allow crypto holders to self custody their tokens, in addition to opposing the creation of Central Bank Digital Currency (CBDC). 

In May, sources told The Block they noticed a significant “shift” in tone from the Biden Administration and campaign toward crypto, with a new willingness to understand digital assets and their communities. However, that seemingly failed to transpire into anything tangible, and with Vice President Kamala Harris now endorsed by President Biden as the Democrat’s presidential nominee, and Warren’s influence over economic policy potentially sidelined, the party’s position on crypto going forward is unclear.