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US lawmakers are preparing to deliver on a widely anticipated federal crypto framework and new crypto-specific anti-money laundering (AML) legislation, both of which look set to emerge under President Trump.
In the past week, members of the Senate Banking Committee from both sides of the aisle have been laying out their legislative priorities under the incoming administration.
Senator Tim Scott (R-SC), chair of the committee, has said that developing a framework for digital assets will be a key deliverable over the next four years.
“Under Chair Gensler, the Securities and Exchange Commission (SEC) refused to provide clarity to the cryptocurrency industry, which has forced projects overseas,” he said.
“Moving forward, the committee will work to build a regulatory framework that establishes a tailored pathway for the trading and custody of digital assets that will promote consumer choice and protection.”
Scott also said the committee will foster an “open-minded” environment for new and innovative financial technologies and digital asset products, such as stablecoins, that promote financial inclusivity.
One bill that aims to accomplish many of these goals is the Financial Innovation and Technology for the 21st Century Act, also known as the FIT Act.
In May 2024, as covered by Vixio, the FIT Act was passed by the House of Representatives in a unanimous, bipartisan vote (and 25 abstentions).
In September, it was received in the Senate and read twice by the Senate Banking Committee, before being put on hold during the final stages of the presidential election.
Both Republicans and Democrats on the committee now say they will “work together” to ensure the aims of the FIT Act are achieved.
The bill is intended to settle a long-running jurisdictional battle between the SEC and the Commodity Futures Trading Commission (CFTC) over regulation of digital assets.
It lays out a clear rulebook for the issuance, custody and trading of digital assets, and includes a new mechanism by which digital assets can become recognised as “digital commodities” rather than securities.
Through an amendment to the Securities Exchange Act 1934, token issuers will be asked to “certify” that their token is sufficiently “decentralised” to be a commodity.
If the token meets the criteria, then it leaves the remit of the SEC and enters that of the CFTC.
According to Republican lawmakers on the House Financial Services Committee, the FIT Act will provide “regulatory clarity” and “robust” consumer protections to the sector.
“Under SEC chair Gary Gensler's leadership, the US digital asset ecosystem has been mired by dysfunction and uncertainty,” they said in a video statement.
“Woefully inadequate guidance and regulation by enforcement have led to turmoil in the marketplace, driving innovation offshore and jeopardising critical consumer protections.
“Under this bill, Americans can feel comfortable engaging with digital assets, knowing that this ecosystem is being brought under a time-tested regulatory umbrella.”
Secondary sanctions and stablecoin rules
On the other side of the aisle, Senator Elizabeth Warren (D-MA) has said that establishing “common sense” rules for blockchain technology will be a priority for the Senate Banking Committee, of which she is a ranking member.
In a letter to Scott Bessent, Trump’s nominee for Treasury secretary, the Massachusetts senator provided greater detail as to what those rules may entail.
Warren’s main concern is that bad actors are increasingly turning to cryptocurrency to enable money laundering, sanctions evasion, and to finance threats to US national security.
In previous Congressional hearings and correspondence, for example, Warren has drawn attention to the use of the Tether stablecoin to facilitate Russian arms deals, and to North Korea’s crypto hacking exploits to fund its nuclear programme.
She also reminded Bessent that, in November 2023, the Treasury published a set of five legislative proposals that it believes would help it to combat crypto-related illicit finance.
One of the proposals highlighted by Warren is the introduction to the Bank Secrecy Act (BSA) of a new category of “financial institution” that would capture crypto exchanges, unhosted wallets, decentralised finance (DeFi) platforms and blockchain validators.
Many crypto firms are already considered money services businesses (MSBs) under the BSA, and are required to register as MSBs if they do business in the US.
However, the proposal would ensure that crypto firms and platforms cannot evade BSA regulation by claiming that they are decentralised, or that they do not take custody of funds.
Similarly, Warren wants to create new secondary sanctions tools that would allow the Treasury to sever the US relationships of any offshore entity suspected of engaging in crypto-related illicit finance.
A final proposal would see the Treasury's Office of Foreign Assets Control (OFAC) given explicit authority over US dollar-denominated stablecoins in any jurisdiction — an admittedly “extraterritorial” policy, which would need additional approval from the US Supreme Court.
If adopted, this would give OFAC the authority to block any transaction that involves US dollar stablecoins, even if the transaction and/or the issuer of the stablecoin has no US touchpoints.
Taken together, these proposals would pose a significant threat to stablecoin issuers such as Tether, which has both significant US touchpoints and is widely used in illicit finance activities.
Warren has asked Bessent to clarify whether he supports these proposals, and whether he will join her in making them a legislative priority under the coming administration.
