Anti-Money Laundering

In the United States, the AML laws are codified in the Bank Secrecy Act (BSA) and administered by the Financial Crimes Enforcement Network (FinCEN). The BSA operates by deputizing financial intermediaries to perform the function of surveilling their customers’ transactions and reporting them to FinCEN, among other regulatory compliance obligations designed for traditional institutions that take custody of customer funds. The BSA applies equally to US crypto firms handling digital assets, who are strongly committed to preventing bad actors from exploiting the crypto ecosystem.

Yet, because the BSA and its implementing regulations are tailored to address custodial intermediaries, it doesn’t apply in the context of peer-to-peer transactions or decentralized finance protocols on public blockchains. Although some policymakers have considered expanding the BSA’s requirements beyond custodial intermediaries, doing so would have a severe and potentially unconstitutional impact on Americans’ fundamental right to privacy. We support policies that clarify US crypto firms’ obligations under the BSA and that enable law enforcement to effectively detect and prosecute illicit activity, while still respecting important privacy concerns.