The Financial Services Committee of the US House of Representatives on January 28 passed three bipartisan bills, including HR 56, which targets the illicit use of virtual currencies by terrorists and other bad actors. That bill, dubbed the Financial Technology Protection Act, subsequently passed on a full floor vote in the House and is now in the hands of the Senate.
Another bipartisan bill, HR 502, which ETHNews reported on last week, was also passed by the House. Better known as the Fight Illicit Networks and Detect (FIND) Trafficking Act, HR 502 proposes research to illuminate how cryptocurrencies are being used to buy, sell, or facilitate sex and drug trafficking.
The overriding objective of these two bills is to strengthen the grip of the US government by developing a better understanding of how illicit groups acquire and trade digital currency such as bitcoin to launder money and expand their domains. One hope among lawmakers is to spur crime-fighting innovation by crypto experts. That explains a $450,000 reward set up for anyone providing information leading to the conviction of digital currency criminals.
HR 56 was introduced by House Financial Services Committee members Ted Budd (R-NC) and Stephen Lynch (D-MA). Chairwoman Maxine Waters (D-CA) selected the bill for floor consideration and worked with Patrick McHenry (R-NC), the ranking member of the committee, to ensure widespread bipartisan support.
The Financial Technology Protection Act has four goals, as stated in the bill summary:
- "This bill provides for the investigation of new financial technologies (e.g., digital currencies) and their use in terrorism and other illicit activities.
- "The bill establishes the Independent Financial Technology Task Force to Combat Terrorism and Illicit Financing, which must research terrorist and illicit use of new financial technologies and issue an annual report.
- "The bill directs the Department of the Treasury to provide a reward for a person who provides information leading to the conviction of an individual involved with terrorist use of digital currencies.
- "The bill establishes the FinTech Leadership in Innovation and Financial Intelligence Program to support the development of tools and programs to detect terrorist and illicit use of digital currencies."
Thomas Emmer (R-MN), co-chair of the Congressional Blockchain Caucus, said in a statement to ETHNews:
"Technologies, new and old present a myriad of unknowns for our society. As we welcome a new technology, we recognize it also comes with unforeseen risks. The work that we can do on the front end to mitigate the risks is important, but we must not let that stifle innovation. Technology itself is not our enemy."
Yaya J. Fanusie, a senior fellow at the Foundation for Defense of Democracies who has testified before Congress on illegal finance, told ETHNews, "This is how the US government is looking to spur innovative technologies to catch bad actors. And in it is the notion that crypto criminals, particularly terrorists, are gaining sophistication. The point is to outsmart, if not stop them outright."
Congress wants badly to stay ahead of the curve, adds Fanusie. "Last week, there was word that Hamas was doing a bitcoin fundraiser. They get on telegram or other channels and urge people to send them bitcoins." That kind of thing has been going on for some time, he adds, but "it looks like they raised 2,000 bitcoins in less than a week. This is an accelerated campaign – in the past, they may have raised a few hundred in a week or more." This new legislation reflects what he calls "a new profile that shows that the government is trying to think of different ways to ensure that law enforcement is not totally behind."
The purpose of the relatively large reward is to attract steady attention in the crypto community without stifling innovation. In fact, setting up rewards for AI-enhanced software engineering is fast becoming a thing. The online house-finder company Zillow recently paid out $1 million to data science crackerjacks to improve its algorithm for estimating home prices.
How does the US compare to other nations in its efforts to stop digital currency villains? Fanusie says the US has done a decent job so far. "The most recent data shows us that US crypto exchanges may be cleaner in terms of the percentage of illegal bitcoin going through compared to earlier data sets. This is the result of the US Treasury getting a bit of a jump start."
With US universities, think tanks, advisors, and CEOs all now zeroing in blockchain technology, looking for where the big payoffs will descend from the drawing boards, the last thing anyone needs is for crypto criminals to go unchecked.
From that perspective, this represents a good start for the 116th Congress.