The US government has a hidden weapon it could deploy against Bitcoin

If you are interested in the future of cryptocurrency, you should probably get to know the Bank Secrecy Act, a nearly 50-year-old law that requires financial institutions in the US to help law enforcement agencies police money laundering. 

The government could someday try to use the law to impose strict controls on how—and whether—certain blockchain-based currencies can be used. 

Take it from David Murray, a vice president at the Financial Integrity Network, a consulting firm in Washington, DC, that focuses on illicit finance. In testimony this week before a Senate subcommittee, Murray called on the government to expand its powers under the BSA to combat the use of cryptocurrency by human traffickers. “Virtual assets are vulnerable to illicit finance because they offer rapid and irrevocable settlement and the potential for anonymity,” he said. 

Traditionally, efforts to weed out illicit finance have focused on banks and other financial intermediaries. But public blockchain networks like Bitcoin pose unique challenges for law enforcement. The BSA, for instance, mandates that financial institutions collect certain information about their users and file reports to the US Treasury Department when transactions are larger than $5,000 or otherwise qualify as “suspicious.” But since a global network of computers—not a centralized institution—validates Bitcoin transactions, who are they supposed to regulate? 

To tighten its grip on cryptocurrency, Murray said, the Treasury Department should broaden the BSA’s definition of a “financial institution” to include certain cryptocurrency “service providers” as well. While cryptocurrency exchanges and crypto-asset storage providers are already covered by the BSA, other important participants in blockchain systems remain outside the law’s scope, and that should change, Murray argued.

One group he mentioned specifically…

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