Al Green Raises Concerns Over New Digital Asset Regulation's Ability To Prevent 'Criminality'

15 hours ago

During a House Financial Services Committee hearing prior to the Congressional recess, Rep. Al Green (D-TX) questioned witnesses about the role of digital assets in illicit and illegal activity.

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00:00The gentleman from Texas, Mr. Green, who is also the ranking member on the Oversight

00:05and Investigation Subcommittee, is now recognized for five minutes.

00:10Thank you, Mr. Chairman.

00:11I thank the ranking member as well, and I'm grateful to the witnesses for appearing today.

00:20I would like an expression of whether or not it is beneficial for us to be concerned with

00:30the use of cryptocurrency in certain areas, more specifically, is it beneficial to use

00:38cryptocurrency of some type in money laundering, terrorist activities, ransomware attacks,

00:46illegal trafficking of drugs, sex, weapons, illegal gambling, and evasion of taxes?

00:55Ms. House, let's start with you.

00:57Is it beneficial for us to be concerned about the use of some sort of cryptocurrency with

01:04this type of criminality?

01:06It's beneficial for us to be concerned about it, if that's what you mean, if it's beneficial

01:10for us for its use in that way.

01:12No, it's not.

01:13It's only beneficial to those who are currently exploiting it.

01:16It's not inevitable to stay that way, but the current state of compliance across the

01:19ecosystem makes it attractive for those users.

01:23Explain what you mean by the state of compliance.

01:25Yes, sir.

01:27So basically, I was the head delegate to the FATF, kind of the UN for anti-money laundering.

01:33If you're not familiar with it, we created the first international standards for virtual

01:37assets in anti-money laundering.

01:40The standards exist.

01:41The policy exists.

01:43It just hasn't been implemented internationally.

01:44If we had wide-scale, cross-global implementation of our requirements to detect and prevent

01:51illicit activity and to stop use of, let's say, sanctioned actors in North Korea's use

01:56of cryptocurrency and that successful ability to launder, we wouldn't be in this current

02:01position.

02:02Unfortunately, it hasn't been implemented internationally.

02:06Does the bill in question prevent this type of illicit activity?

02:11I don't feel that the anti-money laundering measures in it are strong enough.

02:14It makes a reference to them being regulated under the Bank Secrecy Act, but there isn't

02:19clarity on who's purporting the regulations or how strong they need to be.

02:23And as a result, would we still have exposure to the criminality that I call to your attention?

02:31I fear that if we don't strengthen the measures, that that could be an outcome, especially

02:36the extraterritoriality provision.

02:41Is there a rush to judgment here, meaning a rush to, I shouldn't say judgment, a rush

02:48to get this done, such that we don't have the time to carefully craft legislation that

02:57will help us prevent this type of criminality?

03:03I would hope that even with the exigency of the issue, that given the years of bipartisan

03:08work that have been done by many members of this committee and those sitting in this room,

03:11we'd be able to leverage that work.

03:13I feel that the outcome of that work was more reflected in the McHenry-Waters bill, which

03:22had a more holistic coverage of these protections.

03:25I'm not certain why the new legislation doesn't integrate some of those stronger provisions,

03:31which I think would be beneficial.

03:34Would implementing those stronger provisions somehow weaken that legislation, this new

03:39legislation?

03:40I don't feel so.

03:41I think it would strengthen it and make it truly comprehensive.

03:46And do you think that the McHenry-Waters legislation had other redeeming value?

03:55Absolutely.

03:56I think that it had a much more fulsome, holistic list of different measures.

04:02There was some good overlap, too, things like one-to-one capital reserve requirements and

04:07a restriction on re-hypothecation and investment of depositors' assets, basically.

04:14But unfortunately, I feel that the STABLE Act is missing some of the most important

04:17provisions also that are outlined in the McHenry-Waters bill.

04:22When this illicit activity takes place and there's a transfer of money in an illegal

04:28fashion for illegal purposes, more appropriately, who benefits from that in the system?

04:40Currently, the illicit actors benefit from it.

04:43I think that no responsible actor wants to be a platform for money laundering or for

04:48North Korean sanctions evasion and proliferation financing.

04:52So really, it's just the illicit actors that are benefiting from lax controls.

04:55Quickly, to my last question.

04:56So when this occurs, does the person, the people who are purveyors of the currency,

05:05the person with the system, do they get punished in any way?

05:10There should be enforcement actions that can be taken if they fail to meet compliance obligations.

05:16Thank you, Mr. Chairman.

05:17I yield back.

05:18Thank the gentleman.

05:19From Montana, Mr. Downing is now recognized for five minutes.

Al Green Raises Concerns Over New Digital Asset Regulation's Ability To Prevent 'Criminality'

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