Crypto Loopholes: CLARITY Act Poses National Security Perils

(SeaPRwire) –

By: Elena Rostova

The CLARITY Act is a red flag for U.S. national security. In May, FinCEN warned Iran was using crypto to skirt sanctions and fund terror. Yet this legislation would widen gaps in anti-money laundering (AML) rules for crypto. After 9/11, banks had to block bad actors—including those aiding terrorists or corrupt officials. But the CLARITY Act would let crypto firms off the hook. Decentralized finance (DeFi) would remain largely unregulated. Sections of the bill don’t require DeFi businesses to monitor or report suspicious activity. The Fraternal Order of Police warned carve-outs for crypto would strip law enforcement of tools to track criminals.

Lawmakers’ shift on crypto is stark. Once, the U.S. led FATF, listing virtual currency risks as top priorities. Now, the CLARITY Act would preserve systemic vulnerabilities. FinCEN noted uneven regs across jurisdictions let Iranian facilitators access crypto. North Korea, Russia, and China could also exploit these gaps. Supporters say the bill covers intermediaries. But it fails with DeFi and offshore platforms. Stablecoins, a key crypto type, would go unmonitored. Crypto can’t be exempt from AML duties banks face. Congress must treat crypto like traditional finance. Otherwise, we’ll invite sanctions evasion and terror financing back in.

Author bio: Elena Rostova, public policy expert specializing in compliance assessments for governments and sovereign wealth funds, with a focus on financial regulation and national security implications.