Since Donald Trump was elected as president, the crypto industry has been almost euphoric. People who own digital assets are hoping that a wave of crypto-friendly policies will help power the next leg of the bull market.
Trump announced Thursday that venture capitalist David Sacks would be the administration’s “crypto and AI czar,” whose job it would be to coordinate policy on the digital-asset business. The party went on after that.
Some people in the crypto industry think that the next big regulatory battle will be over how to regulate crypto companies so that terrorists, foreign enemies, and criminals can’t use the technology to launder money and pay for their illegal activities. The appointment of Sacks may also be a good sign for this battle.
CEO of the DeFi Education Fund Miller Whitehouse-Levine told MarketWatch, “The policy issues that have to do with national security are going to be some of the stickier ones, but they are ripe for debate at this point.”
Supporters of financial services products built on blockchain networks, mostly Ethereum (ETHUSD -1.16%), like the DeFi Education Fund. These products work without standard middlemen like banks.
Levine said, “The appointment of Sacks shows that the new administration wants to change its stance on crypto from being hostile like the Biden administration did.” However, he also said that there is still no agreement on how the Trump administration should handle worries about national security related to crypto.
A spokeswoman for the Trump-Vance transition team, Brian Hughes, said, “David Sacks is a very successful businessman and investor who will set policy for the second administration in artificial intelligence and cryptocurrency, which are very important to the future of American competitiveness.” “David will protect free speech online under President Trump’s leadership, keep us away from Big Tech bias and censorship, and create the laws that will help the crypto industry grow in the US.”
The Tornado Cash example shows the discussion. Tornado Cash is a so-called “mixer protocol” that lets crypto holders deposit digital assets like bitcoin (BTCUSD -0.96%) and then withdraw different bitcoins to hide where their money came from.
The Treasury Department put restrictions on Tornado Cash because they said it was used to hide more than $7 billion worth of virtual cash from 2019 to 2022.
Later, the Justice Department charged Roman Storm and Roman Semenov, who came up with the plan, with conspiracy to launder money and break sanctions. They could spend up to 45 years in federal jail.
Many people in the crypto community are angry about the case because they see it as an example of how the government punishes speech in the form of computer code instead of punishing people who use the service for bad reasons.
There is disagreement among Republicans in Congress about how to deal with violations of rules against money laundering and terrorism in the digital asset space.
A Republican from South Carolina named Sen. Lindsey Graham and a Democrat from Massachusetts named Sen. Elizabeth Warren have co-sponsored a bill that would require the Treasury Department to issue new regulations on mixers like Tornado Cash. The bill would also require crypto validators, miners, and wallet providers to have anti-money laundering and know-your-customer obligations.
It’s not likely that this bill would become law in its current form, but Whitehouse-Levine said that a recent appeals court decision that Treasury couldn’t approve self-executing code like Tornado Cash may force Congress to deal with the problem through legislation.
Chris Perkins, president of the crypto investment company CoinFund and a combat veteran in the Marine Corps, told MarketWatch that the industry needs to do more to teach lawmakers about the best ways to stop terrorists from getting money.
IEDs were the attackers’ “weapon of choice when they attacked us on the streets of Ramadi,” he said. “They would use garage door openers to set off IEDs and blow us up.”
That makes sense from Treasury’s point of view, so we should ban garage door openers because they’re so dangerous, he said.
Perkins said that it’s much easier to track illegal crypto transactions than it is to do the same thing through normal channels. He also said that there are other ways to keep an eye on illegal crypto funding, such as working with centralised exchanges that change digital assets into dollars.
Others, though, say that it’s not fair to compare code to words in situations like Tornado Cash.
Language doesn’t change the world unless it convinces, educates, or forces other people to do something. In a study of the case, Henry Farrell, a professor of international affairs at Johns Hopkins, wrote that “code is a language where words have inherent power.”
“Making free speech arguments about DAOs like Tornado Cash puts at risk some of the most important free speech victories of the past,” he said. “But everyone might be in even more danger if that side wins.” This is not a world where civil liberties or democratic governments will thrive: “When democratic governments can’t enforce their laws,
