Former Iran director at NSC: Crypto legislation is a ticket to sanctions evasion

In May, the U.S. Treasury Department’s Financial Crimes Enforcement Network (Fin CEN) issued a stark alert: Iran was using digital currencies to evade sanctions and support terrorist groups. Iran attempted to coerce ships trying to exit the Strait of Hormuz into paying tolls in cryptocurrency — something the U.S. Treasury Department has explicitly sought to sanction over the last three months. What if Congress passed legislation to help facilitate these types of corrupt payments? This is a key question the Senate should ask itself while considering the CLARITY Act – a piece of legislation that, as drafted, would solidify glaring, dangerous and shocking loopholes for the crypto industry. This bill would omit many of the standard responsibilities for financial institutions that were put in place to protect national security after the horrific attacks of 9/11. If enacted, it would limit the types of crypto-related firms that have to abide by anti-money laundering (AML) and counter-terrorism financing rules. After 9/11, the Bush Administration worked to ensure that banks and other financial service providers could deny access to bad actors endangering U.S. national security — including those helping terrorists build weapons, transnational criminal organizations, corrupt officials, human rights violators and others. Programs were enacted to identify threats and warn financial service providers, reminding them of their responsibility to the American people. So why is cryptocurrency now getting a pass to work with American enemies? The CLARITY Act would preserve significant loopholes for decentralized finance (DeFi), leaving many identifiable actors involved in these services outside clear Bank Secrecy Act obligations and weakening reforms enacted after 9/11 to combat terrorist financing. Although Section 201 expands AML requirements for some crypto intermediaries, it does not clearly require all businesses that operate, administer, profit from, or facilitate DeFi services