FTX hearing: Warren, O’Leary clash on whether cryptocurrency facilitates money laundering

FTX paid billionaire spokesperson and investor Kevin O'Leary defended cryptocurrency from skeptical lawmakers at a Senate Banking Committee hearing on Wednesday, at a time when he was back and forth with Massachusetts Democratic Sen. Elizabeth Warren over regulations to prevent money laundering.

Warren, a Wall Street hawk and fierce critic of digital currencieshas introduced a bill to end money laundering and the financing of terrorist organizations through cryptocurrencies.

At Wednesday's hearing, he pressed O'Leary on whether the cryptocurrency industry should remain unregulated compared to other banks and financial service providers.

"Mr. O'Leary, I know you are a big supporter of crypto even after losing $10 million in the FTX crash. But you are a seasoned investor," Warren said. "So let me ask you, do you think the potential benefits of cryptocurrency are so promising that we should accept weaker anti-money laundering rules and weaker enforcement from cryptocurrency companies than we demand from banks, brokers and Western Union?"

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O'Leary, who said earlier in the hearing that he believes that cryptocurrency should be regulateddisputed Warren's claim that digital assets enable money laundering on a larger scale than real-world currencies.

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"No, I think we should apply the same regulatory structure that we apply to existing stock and bond trading on broker-linked exchanges. That's not complicated. It's already been implemented in other countries," O'Leary told Warren.

"So, and I disagree, Senator, with your concept that it facilitates money laundering. Coins have been used for drug trafficking schemes since the 1960s and the US dollar when it was thrown out of a Piper plane in a duffel bag. The US dollar is also used by bad actors all the time."

He wanted to continue, but Warren cut him off.

"I appreciate your point that everyone is trying to get involved in money laundering," he said. “That's what terrorists do. That's what the pharmaceutical companies, the drug dealers, do. And that is what states like Iran and North Korea have done.

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"The only point I'm trying to make is, should the same anti-money laundering rules apply to cryptocurrencies in the way that they apply to banks, to stockbrokers, to credit card companies, etc.? to Western Union? And I think your answer to that is yes, right?" she asked.

"Nope!" O'Leary exclaimed. "It's not yes. I'm just saying if you know your client's rules on both sides of the transaction and use a crypto, like USDC, that's regulated, you solve this problem, Senator, overnight."

Warren said that he appreciated O'Leary's position that cryptocurrencies should be regulated as stocks or bonds before advocating for his own bill to regulate digital assets. The Massachusetts Democrat has filed bipartisan legislation with Sen. Roger Marshall, a Kansas Republican, that would expand the Bank Secrecy Act to cover the cryptocurrency industry and apply know-your-customer rules to cryptocurrency participants such as vendors. of wallets, miners and validators. and others.

The bill would also prohibit financial institutions from using or transacting with digital asset mixers and technologies that hide the origins of funds.

In addition, the bill would instruct the Financial Crimes Enforcement Network (FinCEN) to finalize a proposed rule that requires institutions to report certain cryptocurrency transactions using non-hosted wallets, which allow anonymous users to maintain a balance of digital assets outside of an exchange.

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"Rogue nations, oligarchs, drug lords and human traffickers are using digital assets to launder billions in stolen funds, evade sanctions and finance terrorism," Warren said in a statement about his bill.. “The crypto industry must follow common sense rules like banks, brokers, and Western Union, and this legislation would ensure the same standards apply to similar financial transactions. The bipartisan bill will help close loopholes in crypto money laundering and will strengthen the application to better safeguard US citizens security."