DAAMLA stands to harm US crypto industry – Former government officials caution

The Blockchain Association, together with 80 former national security and military officials, wrote another letter to Congressional leaders on Tuesday, this time urging lawmakers to reject a plan that would subject crypto companies to anti-money laundering regulations.

In a letter to four Representatives and two Senators, signatories stated that the Digital Asset Anti-Money Laundering Act (DAAMLA) “risks our nation’s strategic advantage, threatens tens of thousands of US jobs, and bears little effect on the illicit actors it targets.”

Crypto regulation tag of war continues

The Blockchain Association’s first letter, sent in November 2023, was signed by 40 former US military, national security, and intelligence professionals, while this latest letter includes 80 signatories from people with comparable backgrounds. 

While the first letter concentrated on what many saw as an exaggerated story about how cryptocurrencies had a role in the 2023 Hamas-led onslaught on Israel, the latest letter focuses on the policy aspects of Warren’s DAAMLA bill. Kristin Smith, CEO of Blockchain Association, wrote in November that:

It’s clear that there is a mismatch between the assumptions about the role that digital assets play in global financial transfers and the facts on the ground […] The signatories state clearly that no amount of money, whether it be gold, dollars, or digital assets should be used to fund illicit activity, but we must also be able have a reasonable conversation about the latter when it comes to proposed solutions to the problem. Kristin Smith

Senator Elizabeth Warren, D-Mass., who co-sponsored DAAMLA, stated in December that former law enforcement and government personnel are undercutting bipartisan efforts to regulate the crypto industry. In a letter to the Blockchain Association and lobbyist group Coin Center, Warren claimed that crypto businesses have a “revolving door” of ex-federal personnel.

Sen. Warren was not the recipient of Tuesday’s letter, but signatories responded to her criticisms and defended their “motivations and integrity.”

“We again raise our voice, not to inject ourselves needlessly into a political world that is new to many of us, but to stand up for what our experience tells us is right,” the letter released on Tuesday reads.

The letter’s co-signers include Michele Korver, head of regulation at Andreessen Horowitz, and Faryar Shirzad, Coinbase’s chief policy officer. Korver previously worked for the Financial Crimes Enforcement Network (FinCEN) as its chief digital currency advisor.

So, what’s the problem?

According to the Blockchain Association letter, Warren’s legislation “…risks our nation’s strategic advantage, threatens tens of thousands of U.S. jobs, and bears little impact on the illicit actors it targets.” 

The letter’s message can alternatively be regarded as a response to Warren’s letter to the Blockchain Association. She wrote in her letter that the Blockchain Association was:

…flexing a not-so secret weapon: a small army of former defense, national security and law enforcement officials…to undermine bipartisan efforts in Congress and the Biden Administration to address the role of cryptocurrency in financing Hamas and other terrorist organizations. Elizabeth Warren

Warren was alluding to how the Blockchain Association assisted in organizing a visit to Capitol Hill to discuss the issues outlined in their initial letter, which was sent in November of 2018. Coinbase and the think group Coin Center also got similar letters from Warren. 

The Blockchain Association argues in a recent letter to Warren that she “… questioned the motivations and integrity of scores of U.S. military and intelligence veterans without addressing the substance of our arguments…”

At the very least, Warren has persuaded 19 other U.S. Senators to join her, indicating that there is both an ongoing conversation in the Senate and momentum toward legislation to address the illegal use of cryptocurrencies. Senator Sherrod Brown (D-OH), the Chairman of the Senate Banking Committee, has yet to sign on to the DAAMLA or any other legislation. 

As Chair, Brown still wields significant control over what type of cryptocurrency legislation, if any, moves from the Senate Banking Committee to the full Senate for consideration.