The crypto industry is sounding the alarm at the possibility the U.S. will be empowering the Treasury Department to make arbitrary decisions about whether to allow financial transactions – including cryptocurrency transactions across borders.
A provision in the America COMPETES Act, a bill introduced in the U.S. House of Representatives earlier this week, would allow the Treasury secretary to block or “impose conditions” on transactions, should the official find the transaction or the accounts involved are engaged in money laundering.
The overall bill is aimed at spurring economic competitiveness with China.
Industry think tank Coin Center warned in a blog post that the bill could allow the Treasury secretary to block all U.S. financial institutions from interacting with a crypto exchange, jurisdiction that has crypto exchanges, crypto transactions validated by a non-U.S. miner or non-custodial wallets.
“In brief, it would hand the Treasury secretary unchecked discretion to forbid financial institutions (including cryptocurrency exchanges) from offering their customers access to cryptocurrency networks. The secretary may not use this discretion immediately, but it is not power the Department should have,” the blog post said.
The Treasury secretary already has this power in limited quantities. Under existing law, the regulator, in consultation with the Federal Reserve chairman, secretary of state, federal regulators and other agencies can impose these restrictions on transactions. However, a public rulemaking notice must be issued alongside the restriction, and the restriction will lift after 120 days unless the Treasury Department implements a rule continuing the block after the comment period.
The new provision would remove the comment period and 120-day expiration, Coin Center said, in addition to explicitly adding digital assets to the types of financial transactions that the Treasury Secretary can restrict.
The provision highlights “innovations in financial services” that make it easier to send funds across borders, “particularly through digital assets” that make it easier for criminals to transfer funds (though the bill also concedes that digital assets may be “useful to legitimate consumers.”
“Ransomware attacks on U.S. companies requiring payments in cryptocurrencies have increased in recent years, with the U.S. Treasury [Dept.] estimating that ransomware payments in the United States reached $590 million in just the first half of 2021, compared to a total of $416 million in 2020,” according to the authors of the bill.