Today, Senators Elizabeth Warren and Roger Marshall introduced the “Digital Asset Anti-Money Laundering Act of 2022” that, if passed, would have the functional impact of eliminating all US-based blockchain innovation, including all uses of energy efficient proof-of-stake blockchains. 

While POSA agrees with the need to address the risks associated with money-laundering and illicit financing, this bill shows a fundamental lack of understanding of how blockchain technology works and is a threat to all blockchain-based activity in the United States by requiring everyday Americans who participate in validating proof-of-stake blockchains to meet the same regulatory requirements as crypto exchanges and other money services businesses (MSB) like Western Union.

Thousands of everyday Americans act as stakers, operate nodes, and participate in validating blockchains. In their role, these validators pose no material risk of laundering money. They do not transmit digital assets and the only digital assets they receive come in the form of rewards generated by the blockchain itself. For these reasons, the Treasury Department has already recognized that network validators should not be required to register as MSB’s, the same classification used for currency exchanges, payment processors, and crypto trading platforms. 

Most blockchains are permissionless and fully decentralized, meaning anyone can help record transactions in exchange for blockchain rewards. Proof-of-stake blockchains allow anyone, even those without significant digital assets or sophisticated cryptocurrency mining equipment, to participate in validating blockchain transactions. This democratized participation is a critical component of the industry and allows proof-of-stake blockchains to be a green alternative that uses less than 99% of the energy of proof-of-work blockchains. 

This legislation would make the use of any blockchain functionally impossible in the United States and would severely limit American technological innovation. Blockchains serve purposes beyond transmitting digital assets, and use-cases are being developed in a variety of areas including logistics, energy, cybersecurity, and healthcare. 

POSA’s Executive Director, Alison Mangiero, stated:

“This bill demonstrates the problem of short-sighted and heavy-handed regulation aimed at a technology itself instead of harmful ways a technology could be used. While validators of proof-of-stake blockchains verify the accuracy of transactions, they have no insight into or control over the nature of those transactions and are not themselves transmitting any digital assets. Forcing them to register as money transmitters would do nothing to reduce money laundering and would halt  all blockchain-based innovation and activity in the United States.”