The crypto sector may soon see a new level of collaboration between federal agencies and private companies, thanks to a new bill introduced by two senators on Wednesday.
The Preventing Illicit Finance Through Partnership Act of 2024
Senators Cynthia Lummis (R-WY) and Bill Hagerty (R-TN), both members of the Senate Banking Committee, proposed the Preventing Illicit Finance Through Partnership Act of 2024, a legislation that seeks to combat illicit finance by fostering communication between federal law enforcement agencies and private companies.
The bill would establish a pilot program chaired by the attorney general, consisting of 20 money services organizations, such as crypto exchanges, custodians, and payment providers. The program would allow federal agencies to share detected possible instances of illicit finance with the private sector entity in question and vice versa.
According to a press release from Senator Hagerty’s office, the bill would provide “private companies a channel to alert federal agencies to any suspicious money transfers and sanctions evasion”. The bill would also require the attorney general to report to Congress on the effectiveness of the program and make recommendations for further actions.
Why Crypto Regulation Matters
The bill comes at a time when the crypto sector is facing increased scrutiny and regulation from various authorities, both in the US and abroad. Crypto assets, such as Bitcoin, Ethereum, and stablecoins, have grown in popularity and adoption in recent years, but they also pose challenges and risks for regulators, law enforcement, and consumers.
Some of the issues that regulators are concerned about include money laundering, terrorist financing, tax evasion, fraud, market manipulation, consumer protection, and national security. Several federal agencies, such as the Treasury, the SEC, the CFTC, the IRS, and the FBI, have been involved in regulating and investigating different aspects of the crypto sector.
However, some crypto advocates and industry players have argued that the current regulatory framework is unclear, inconsistent, or overly burdensome, and that it stifles innovation and competitiveness in the US . They have called for more clarity, guidance, and collaboration from regulators, as well as recognition of the potential benefits and opportunities that crypto assets can offer for the economy and society .
A Collaborative Approach to Crypto Regulation
Senators Lummis and Hagerty’s bill may be seen as a collaborative approach to crypto regulation, as it aims to leverage the expertise and resources of both the public and private sectors to address the challenges and risks posed by crypto assets. The bill also recognizes that crypto assets are not inherently problematic, but rather depend on how they are used and by whom.
“There are bad actors in every industry and crypto assets are no exception but make no mistake – crypto itself is not the problem,” said Senator Lummis. “The Preventing Illicit Finance Through Partnership Act will allow federal regulators to work with the private sector to gain insight into the often-misunderstood world of crypto to weed out bad actors without crushing an entire emerging industry”.
Senator Hagerty echoed this sentiment, saying that “federal law enforcement agencies already have the tools to combat illicit finance—they just need to communicate with the private sector to deploy them most effectively”. He added that “by fostering collaboration and information sharing, this bill will ensure that all parties at the table are working together to detect and disrupt bad actors”.
The bill also has the support of some prominent crypto industry players, such as Coinbase, Gemini, and the Blockchain Association, who praised the senators for their leadership and vision in introducing the bill.
“This public-private partnership will help inform regulators about the use cases for crypto assets and clear the way to establishing federal rules of the road that will keep the industry in America and solidify crypto’s role as the next frontier of financial innovation,” Lummis concluded.