Coin Center Slams Senate DeFi Bill as Messy and Unconstitutional
The crypto advocacy group is blasting the recent bipartisan proposals captured in the US Senate bill that targets to enforce anti-money laundering sanctions in the decentralized finance (DeFi) space.
Coin Center decries the proposals would propagate the unconstitutional agenda by granting the US Treasury overboard authority. Its crypto legal experts expressed pessimism over the bipartisan legislation to tackle the violations against the money laundering witnessed in the DeFi ecosystem.
Coin Center Skeptic of the Bipartisan Proposals in CANSEE Bill
The legal experts expressed skepticism on the viability of the freshly proposed bill though a product of bipartisan proposals. The legislation identified as the Crypto Asset National Securing Enhancement (CANSEE) imposes penalties on parties exercising control over the DeFi project. The proposed bill provisions for penalties to DeFi owners for noncompliance with the basic anti-money laundering (AML) requirements. Additionally, the penalties would arise from non-compliance with the financial disclosures currently applying to the banks and platforms that offer centralized crypto trading.
The legal experts allege that CANSEE is conferring the Treasury Secretary with excess authorities. In particular, they consider the definition of parties controlling the DeFi service as the sole discretion of the Treasury Department.
The Coin Centre revealed via the Thursday, July 20 post that the CANSEE bill grants virtually unbounded discretion to the Treasury Secretary. In particular, it involves deciding on the criteria to determine that one is exercising control over the DeFi protocol.
The think tank alleges that the control could have extended meaning to net the open-source software contributors. While the bill promoters did not project such an extension, the plain interpretation of the bill indicates permitting the Secretary to do so.
Treasury Unlikely to Grant Exemptions to the DeFi Protocols
Coin Center blasts the bill as messy, indicating that DeFi involves a decentralized identity. Such should ensure that no concrete parties exercise control over the service or protocol. Despite such awareness, the Treasury report conveyed on April 7, 2023, majority of DeFi protocols lean towards centralization than they claim.
The legal experts contend that the Treasury Department could identify with the report that DeFi has defined governance structures. The report indicated that DeFi protocols have concentrated voting power exercised by the wealthy holders of governance tokens. Although acknowledging the existence of decentralized services in name only, Coin Centre opine that the existing rules could apply to such services.
Coin Centre communications director Neeraj Agrawal argued that the current financial surveillance regime would apply to the intermediaries. He indicated that the decentralized protocols operate without intermediaries. Often, there are two parties involved in the transaction.
The CANSEE bill mandates the Treasury with the responsibility to grant exemptions to the DeFi protocols found complying with existing regulations. Coin Center is concerned that the bill leaves the Treasury with the discretion of never granting such exemptions. Such an outcome would replicate the current concerns of US regulators seemingly assaulting the crypto industry.
CANSEE Bill Extends Penalties Scope to Software Developers
Coin Center is challenging the CANSEE bill as presenting a constitutional issue in the penalties proposed. It extends penalties as a consequence borne by all parties. The provision penalizes parties availing the application meant to facilitate transactions by leveraging digital asset protocol. The provisions make penalizing software developers who exercise first amendment rights possible when publishing code inferred as free speech.
The not-for-profit organization considers penalizing the software developers would constitute the government’s first attack on the right. Such a possibility would reincarnate the arrest of Alex Pertsev, identified as the developer of Tornado Cash. His arrest in August 2022 arose shortly after the sanctions imposed by the Treasury against the Ethereum-based protocol. The department alleged Pertsev developed the privacy protocol that would become popular conduct for criminals to hide their ill-gotten gains.
The bill borrows a leaf from Senator Elizabeth Warren’s bill designed to combat violations of crypto sanctions. The version proposed by Massachusetts had unique language that targeted blockchain node runners and software developers affiliated with networks orchestrating money laundering.
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