Warren’s alleged work with short-sellers heats up the anti-crypto army

What Do Progressive Democrats, Republican National Security Hawks, and Wall Street Traders Have in Common? They are all apparently included in the “anti-crypto army” of United States Senator Elizabeth Warren. progressive senator informed of The alliance with Mark Cohodes, a Wall Street short-seller profiting from the recent carnage in crypto banks, is the latest example.

Crypto natives may view the unusual pairing as further evidence that the United States is plotting to kill Web 3. They’re not entirely wrong, but America’s polarized factions are uniting against crypto for a reason. The industry has consistently failed to address legitimate concerns about financial crime and national security. That needs to change, or Warren’s anti-crypto army will continue to attract recruits.

Publicly traded crime scene?

In late 2022, CoHods circulated a memo on Capitol Hill flagging regulatory risks “existential” at crypto-friendly bank Silvergate. The short-seller dubbed the bank a “publicly traded crime scene” and claimed, among other things, that Silvergate had “enormous” Know Your Customer (KYC) and anti-money laundering (AML) liabilities. For these rules Financial institutions are required to carefully vet their customers, and they are strictly enforced.

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The Cohods had reason to be concerned. Problems with KYC/AML compliance are rife in crypto, and Silvergate appears to be a glaring example. According For New York magazine, Silvergate was “the go-to bank for more than a dozen crypto companies that ended up under investigation, closed, fined, or in bankruptcy,” including FTX, the defunct crypto exchange. Cohods claimed the bank went so far as to help FTX siphon users into making deposits at their sister fund Alameda.

Silvergate shut down after the FTX fire in March, but its collapse may be a symptom of serious industry-wide problems. Cahodes claimed that the crypto bank was “a worldwide money laundering story with a crypto cover.”Claimed“There was a worldwide money-laundering story (…) with a crypto rapper.”

anti-crypto army

Cohods’ Silvergate memo reportedly found a receptive audience in Warren, who has become one of crypto’s most caustic critics. contrary to Call For a property tax of up to 6% or a “just and equitable cannabis industry,” Warren’s crypto critique is reaching far beyond progressive circles. His message is simple: Crypto, Warren says, enables bad actors — from drug traffickers to rogue states — and is a threat to national security.

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His anti-crypto crusade is gaining traction. In January, three US financial regulators published a joint statement on crypto banking. it resonated heavily with Warren offers, effectively laying the groundwork for a regulatory crackdown. Senator working with Republicans on one Bill It will impose stricter industry-wide KYC requirements. He is even getting the cautious support of banking lobbyists.

The problem isn’t with Warren’s overarching concerns. Web3 should be responsible for filtering out bad actors. It’s that clumsy policy implementation causes irreparable harm to the nascent industry. For example, Warren’s proposed KYC/AML law appears to indiscriminately target almost every touch point in crypto, including validators. This could seriously undermine network decentralization, arguably the most essential feature of Web3.

Crypto Must Adopt KYC/AML To Weak Warren

Silvergate may have collapsed, but KYC/AML liabilities still plague Web3. This is not an accident. Anyone familiar with crypto’s cyberpunk origins knows that, for many users, anonymity is a feature, not a bug. Indeed, privacy and self-custody belong to Web3 raison d’etre,

It is a mistake to dismiss crypto as a tool for money laundering. The unique features of blockchain have transformative applications in industries ranging from asset management to media. Unfortunately, they are also setting the industry up for direct conflict with US regulators.

Web3 is not out of options. Emerging technologies are creating new ways to address policy concerns without compromising the core values ​​of crypto. For example, zero-knowledge identity proof promises seamless on-chain KYC/AML checks that respect users’ privacy. Meanwhile, blockchain intelligence platforms, such as Chainalysis, have been a boon for financial crime enforcement agencies.

Industry must stop burning political capital by completely opposing KYC/AML requirements. Instead, we need to start attacking these challenges ourselves—or Warren’s army will.

This article is for general information purposes and is not intended and should not be construed as legal or investment advice. The views, opinions and opinions expressed here are those of the author alone and do not reflect or represent the views and opinions of Cointelegraph.