US President to Gain Authority to Ban Cryptocurrencies

The US government will be granted authority to the president to regulate and ban cryptocurrencies linked with illegal activities in the country.

A new law proposed by United States Senator Mark Warren, which is intended to combat terrorism and other illicit activities, is causing significant concern among members of the crypto community.

On Thursday, Scott Johnsson, a finance lawyer and a strong advocate for the developing crypto economy, emphasized the implications of this new law on social media. He stated that the legislation, already submitted to the Senate for review, would empower the President to restrict access to digital assets.

Borrowing Components from Existing Legislation

The President could use the law to impose user-level restrictions on decentralized finance (DeFi) protocols that the US Department of Treasury considers problematic, according to Johnsson, who expressed his apprehensions on X (formerly known as Twitter).

Johnsson wrote, “It is difficult to comprehend how this is not intended to be a user-level ban power by the President on any protocol or smart contract that is deemed by the Treasury Secretary to be ‘controlled, operated, or [made] available’ by a foreign sanctions violator.”

A post on X that revealed Senator Warren had incorporated clauses from the Terrorist Financing Prevention Act [S.3441] to modify the proposed law prompted Johnsson’s concerns.

This act, introduced by US Senators Mitt Romney, Mark Warner, Mike Rounds, and Jack Reed in December 2023, enables the Treasury to block transactions to a “foreign digital asset transaction facilitator” designated as a sanctioned entity.

The finance council thinks that including the new clause could harm the crypto sector, as it would grant the Treasury the authority to determine the industry’s future and potentially undermine decentralized finance.

Consequences for the Crypto Industry

Johnsson posits that the law’s broad applicability could compel users to transition to Know Your Customer (KYC)–compliant and permissioned blockchain networks, thereby limiting them to regulated blockchains.

Additionally, Johnsson proposed that the proposed law could be a component of a more extensive US strategy to regulate the crypto economy under the pretext of anti-terrorism measures.

The proposed law defines crypto assets as any digital representation of value protected by cryptographic ledgers, such as communication protocols and smart contracts. It is as follows:

“[…] any communication protocol, smart contract, or other software […] deployed through the use of distributed ledger or similar technology; and […] that provides a mechanism for users to interact and agree to the terms of a trade for digital assets.”

The law would allow the President to restrict transactions between foreign entities and US residents identified as being associated with terrorism once implemented.

Furthermore, American financial institutions would be subject to severe penalties if they were discovered to be facilitating such transactions by the law.

Political Climate and Crypto Legislation

In the interim, the proposed legislation is implemented amid substantial political turmoil in the United States.

On the one hand, legislative actions have supported cryptocurrencies, such as the Financial Innovation and Technology for the 21st Century Act, which achieved bipartisan support.

A recently enacted bill by Congress was intended to address the Staff Accounting Bulletin No. 121 (SAB 121) of the Securities and Exchange Commission (SEC). This measure forbids banks from maintaining digital assets and mandates that companies that store cryptocurrencies document customer crypto holdings as liabilities on their balance sheets.

Nevertheless, President Joe Biden determined that the legislation did not advance the prosperity of the American populace after he vetoed the legislation. He stated that his administration “will not endorse policies that endanger the interests of investors and consumers.”