Crypto exchange Coinbase has called on the US government to make use of blockchain analytics, artificial intelligence and other modern technologies to curb financial crime within the sector, in response to the Treasury Department's request for comment on the right way to prevent criminality within the crypto space.
In the Oct. 17 letter written by Chief Legal Officer Paul Grewal and sent on Monday
“Blockchain and other modern technologies can address these emerging risks. Treasury and other policymakers should encourage their use to discover and deter criminality.”
“This would support a key objective of the Anti-Money Laundering Act of 2020, which aimed to modernize the Bank Secrecy Act,” he added.
Coinbase Chief Policy Officer Faryar Shirzad reiterated this stance in an X post on Monday, arguing that the U.S. government should follow within the footsteps of crypto exchanges and embrace “innovations to modernize anti-money laundering with proven digital tools corresponding to AI, APIs, digital IDs and blockchain analytics.”
Source: Faryar Shirzad
Regulatory clarity for AI and API is essential to combating financial crime
Among the measures Grewal wants Treasury to contemplate is a regulatory exemption under the Bank Secrecy Act for corporations that use AI and application programming interfaces (API)-driven surveillance tools.
“The conditions for this protected harbor should deal with governance and outcomes somewhat than forcing a one-size-fits-all model,” he said in a follow-up X post on Monday.
According to Grewal, corporations are hesitant to totally utilize AI in anti-money laundering efforts on account of an absence of regulatory clarity.
He also believes that APIs face challenges corresponding to an absence of standardization and regulatory fragmentation, which may very well be addressed by a guide that “sets out acceptable use cases” by “clearly outlining privacy requirements and standards for interoperability – allowing corporations to soundly adopt and integrate APIs into their programs.”
Blockchain technology also needs clearer rules
At the identical time, Grewal wants the Treasury Department to publish guidance that recognizes and promotes decentralized IDs and zero-knowledge proofs as valid types of customer verification and blockchain analytics clustering for anti-money laundering compliance.
“The updated guidance should further encourage the sharing of knowledge relevant to potential illicit activities channeled through blockchains, while being careful to not impose excessive record-keeping requirements on anyone involved in a blockchain transaction,” Grewal added.
In its Aug. 18 notice, the U.S. Treasury Department sought comments on modern methods to detect illegal activities involving digital assets, as required by the GENIUS Act. This ended last Friday.
Think tank wants a communication system
Meanwhile, Jim Harper, a non-resident senior fellow on the American Enterprise Institute public policy think tank, took a distinct approach.
In his Monday blog post, which drew on his September 15 paper promoting the identical idea, he argues that a communications system needs to be established where law enforcement agencies can directly query crypto firms for investigative purposes.
“Such a system would maintain or strengthen law enforcement capability while eliminating the necessity for the present comprehensive and expensive financial surveillance system,” he said.
