A provision in the America COMPETES Act would give the Treasury unchecked power to ban cryptocurrencies, reports Coin Center.
America COMPETES Act
Introduced in the House [PDF], the America COMPETES Act of 2022 aims to provide economic competitiveness against China. It also removes administrative procedures and safeguards from imposing “special measures” prohibitions in the Bank Secrecy Act. Finally, it expands authority for these prohibitions to cryptocurrency.
31 U.S. Code § 5318A contains five special measures for “jurisdictions, financial institutions, international transactions, or types of accounts of primary money laundering concern.” The first four lets the Secretary of the Treasury tell banks to surveil and keep records of customer transactions. As Coin Center puts it, “think: every detail of your transaction activities now goes straight to a criminal investigation file.” The fifth lets the Secretary tell banks to freeze customer accounts.
For example, if the Secretary of the Treasury deems that either (a) the Netherlands, (b) a Dutch crypto exchange, (c) all cryptocurrency transactions validated by a miner outside of the US, or (d) all non-custodial wallets are “of primary money laundering concern,” then she can swiftly make it illegal for any US financial institution (regulated cryptocurrency exchanges included) from maintaining accounts for customers involving those “concerns.”
The Bank Secrecy Act requires public notice and allows for public comment before special measure number five goes into effect, or within 120 days for special measures 1-4. None of the special measures can become permanent, under the current law, without a public process.
The America COMPETES Act would remove all formal controls, time limits, and public notice requirements from the implementation of these special measures. It lets the Secretary impose these measures “by order, regulation, or otherwise as permitted by law” permanently and secretly without a public process. As they currently exist, the special measures can already be interpreted to include cryptocurrency accounts.
The provision would add a sixth special measure for the Secretary to stop any transaction deemed a transmittal of funds. “Transmittal of funds” is not defined in the Act, implying that it’s at the discretion of the Secretary.
In short, the language facially empowers the Secretary to prohibit any (or indeed all) cryptocurrency transactions at financial intermediaries without any process, rulemaking, or limitation on the duration of the prohibition.