FTX Session: Warren and O’Leary clash over whether cryptocurrency facilitates money laundering

FTX spokesperson and billionaire investor Kevin O’Leary defended the cryptocurrency from skeptical lawmakers at a Senate Banking Committee hearing on Wednesday, at one point sparring with Massachusetts Democratic Sen. Elizabeth Warren on regulations to prevent money laundering.

Warren, a Wall Street hawk and fierce critic of digital currencies, has introduced a bill to crack down on money laundering and the financing of terrorist organizations through cryptocurrency.

In Wednesday’s session, I pressed O’Leary on whether the crypto industry should remain unregulated compared to other banks and financial service providers.

“Mr. O’Leary, I know you’re a huge cryptocurrency supporter even after you lost $10 million in the FTX crash. But you’re 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 compliance from crypto companies than we would require from banks, from brokers, and from Western Union?”


Sen. Elizabeth Warren, D-Massachusetts, speaks during a Senate Banking, Housing, and Urban Affairs Committee hearing on FTX in Washington, D.C., Wednesday, Dec. 14, 2022. (Ting Xin/Bloomberg via Getty Images/Getty Images)

O’Leary, who said earlier in the hearing that he believes cryptocurrency should be regulated, disputed 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 the current trading of stocks and bonds on exchanges linked to broker-dealers. It’s not complicated. It’s already been implemented in other countries,” O’Leary told Warren.

And so, I disagree, Senator, with your notion that it makes money laundering easier to do. Coins have been used in drug smuggling schemes since the 1960s and US dollars when thrown out of kites in a duffel bag. US dollars are also used by Bad actors all the time.”

The investor in the project and

Kevin O’Leary, Chairman of O’shares ETFs for O’Leary Funds Management LP, speaks during a Senate Committee on Housing, Housing and Urban Affairs hearing at FTX in Washington, DC, Wednesday, December 14, 2022. (Ting Xin/Bloomberg via Getty Images/Getty Images)

He wanted to continue, but Warren cut him off.

“I appreciate your point that everyone is trying to engage in money laundering,” she said. This is what terrorists do. This is what drug dealers do in drug companies. This is what countries like Iran and North Korea did.

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“The only point I’m trying to make is, should the same rules against money laundering apply to cryptocurrency the way they apply to banks, stock brokers, credit card companies, Western Union. And I think your answer to that is yes, right?” she asked.

“number!” exclaimed O’Leary. “It’s not a yes. I’m just saying if you know your client rules on both sides of the transaction and use a cryptocurrency, like regulated USDC, you solve this problem, Senator, overnight.”

Republican Senator Roger Marshall of Kansas

Sen. Roger Marshall, R-C., speaks during a news conference in Washington, D.C., Aug. 5, 2022. (Sarah Silbiger/Bloomberg via Getty Images/Getty Images)

Warren said she appreciated O’Leary’s position that cryptocurrencies should be regulated like stocks or bonds before she would advocate for her own bill to regulate digital assets. The Massachusetts Democrat has introduced bipartisan legislation with Sen. Roger Marshall, R-K., that would expand bank secrecy law to the cryptocurrency industry and apply know-your-customer rules to crypto participants like wallet providers, miners, and validators. and others.

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

Furthermore, the bill would direct the Financial Crimes Enforcement Network (FinCEN) to finalize a proposed rule that would require institutions to report certain cryptocurrency transactions using non-hosted wallets, and that would allow anonymous users to maintain a balance of digital assets off-exchange.

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“Rogue states, oligarchs, drug lords, and people smugglers use digital assets to launder billions in stolen money, evade sanctions, and fund terrorism,” Warren said in a statement about her bill.. “The cryptocurrency industry must follow common sense rules like banks, brokers, and Western Union, and this legislation will ensure that the same standards are applied across similar financial transactions. The bipartisan bill will help close crypto money laundering loopholes and strengthen enforcement to better protect American citizens’ security.”

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