HomeRegulationsNew US Bill May Target Decentralized Protocols

New US Bill May Target Decentralized Protocols

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A new bill made its way to the Senate that could foster the grounds for unfair treatment of open-source, decentralized protocols. The Intelligence Authorization Act of Fiscal Year 2025 was passed by the Senate State Committee and was approved unanimously.

Section 423 of this bill concerns crypto and decentralized protocols as it uses language to cover assets and dApps extensively, providing the impetus to sanction them if they interact with illicit wallets and funds. The bill uses the term “foreign digital asset transaction facilitator,” while discussing placing sanctions on these entities serving users in the US if they do not block illicit fund flows.

The bill will probably pass and become law next year, but how much of it will be implemented as law is a question. Lawmakers can recognize the harmful impacts this can bring to the crypto industry and force changes if not removal of the section. If passed as is, the Intelligence Authorization Act can be weaponized by anti-crypto legislators to take down some of the biggest protocols and companies in the industry.

Decentralized protocols do not usually restrict fund flows from any wallet, which is why they are decentralized. Their open-access lets any user utilize their funds to harness their utility, irrespective of whether the funds are illicitly obtained or not. Thus, this bill, if passed in its current state, can provide the government the ability to take down numerous dApps.

The crypto community has strongly argued against the government placing bans on protocols and code. The sanctioning of Tornado Cash by US authorities has led many crypto enthusiasts to call the government out for banning code. While Tornado Cash was being used to launder millions in criminally obtained funds, most protocols witnessed usage from users not so notorious.

The bill does not contextually mention what kind of protocols will be banned, like the tumblers and mixers that most cybercriminals use. Therefore, it leaves room for any protocol dealing even with a fraction of a dollar’s worth of criminally obtained funds to be banned.

Image by herbinisaac from Pixabay

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