U.S. Senate Passes $886B Military Spending Bill With Crypto AML Provision

The U.S. Senate on Thursday evening passed the 2024 National Defense Authorization Act (NDAA), which included a provision that tightens oversight over financial institutions engaged in crypto trading and takes aim at crypto mixers and “anonymity-enhancing” crypto assets.

The amendment was brought forward by a bipartisan group of U.S. Senators, comprised of Kirsten Gillibrand (D-N.Y.), Cynthia Lummis (R-Wyo.), Elizabeth Warren (D-Mass.) and Roger Marshall (R-Kan.), who said in a press release that the move represented "one of the most substantial congressional actions to date regarding crypto assets."

The amendment was crafted by provisions taken from the 2023 Lummis-Gillibrand Responsible Financial Innovation Act and Senator Warren’s and Senator Marshall’s Digital Asset Anti-Money Laundering Act, introduced in 2022. Specifically, it requires that the Secretary of the Treasury "establish examination standards for crypto assets," which would help examiners better assess risk and ensure compliance with money laundering and sanctions laws. In addition, it requires the Treasury Department to conduct a study on "combating anonymous crypto asset transactions," including the use of crypto mixers that are sometimes used to obfuscate funds.

“Cracking down on illicit finance in the crypto asset industry is essential for weeding out bad actors and ensuring crypto assets are not used to evade sanctions and fund terrorism,” said Senator Lummis in the press release.

It’s a common practice to add amendments to the bill that aren’t necessarily defense-related. The House passed its version of the NDAA, which is seen as a must-pass piece of legislation, earlier this month, and both chambers now need to negotiate on a version that can pass both chambers.

Earlier Thursday, the House Agriculture Committee advanced the Financial Innovation Technology for the 21st Century Act, which would create a federal regulatory framework for crypto in the U.S. The House Financial Services Committee passed its version of that bill on Wednesday.