Human-Trafficking Expert Urges US Congress to Regulate Crypto Miners

Cryptocurrencies are helping to facilitate human trafficking, and thus should be regulated far more heavily than at present, an expert witness will tell a U.S. Senate subcommittee today.

In written testimony, David Murray, vice president for product development and services at Financial Integrity Network, recommended that Congress create a new class of regulated financial institutions known as "Virtual asset transaction validators," i.e. crypto miners.

These validators would have to know who they are dealing with, just like other financial institutions but very much unlike today's miners.

"For these essential actors in cryptocurrency transactions, such a regulatory regime would emphasize counterparty financial institution due diligence," Murray said in his remarks to be delivered before the Subcommittee on National Security and International Trade and Finance.

"The lack of systemwide financial crimes compliance governance for some existing cryptocurrencies allows criminals space to operate and makes it difficult for the United States to isolate rogue service providers from the U.S. financial system," he said.

A former director of the Office of Illicit Finance at the Treasury Department, Murray argued that miners must, at the very least, govern who can participate in networks, and vet any issuers, exchanges or custodians they serve.

Mining is not currently regulated under the Bank Secrecy Act, "But virtual asset transaction validators could be gatekeepers for virtual asset systems if they are brought into the scope of the BSA," said Murray, whose Washington, D.C.-based firm advises financial institutions and governments on combating money laundering.

Two other expert witnesses at the subcommittee hearing - Nebraska State Attorney General Douglas Peterson and Nebraska State Senator Julie Slama - also brought up the use of cryptocurrency in human trafficking in their prepared remarks.

Regulating miners the way Murray described would be tantamount to prohibiting miners from participating on public blockchain networks, said Peter Van Valkenburgh, director of research at the Washington-based think tank Coin Center.

He adds that the Bank Secrecy Act's job is not to "Enable or accomodate all manner of financial products and services, regardless of the threat that they pose to financial transparency."