Key Takeaways
- A new law grants the US president power to block digital asset access.
- The law defines digital assets broadly, including protocols and smart contracts.
- Critics warn this could push users to regulated, KYC-compliant blockchain networks.
A new U.S. law now grants the president unprecedented authority to block access to digital assets, sparking widespread concern about its implications for users and the digital asset market.
Scott Johnsson, a notable figure in the digital assets field, expressed his criticism of the law’s extensive reach on June 6. He stated:
It’s hard to see how this isn’t intended to be a user-level ban power by the President on any protocol/smart contract that’s deemed by the Treasury Secretary to be ‘controlled, operated or made available’ by a foreign sanctions violator. Breathtaking scope and implications to corral users to KYC/permissioned chains.
On June 5, an X user highlighted Senator Mark Warner’s strategic move in incorporating legislative elements that enable these new powers for the U.S. president over digital assets. The law broadly defines digital assets as any digital representation of value recorded on cryptographically secured distributed ledgers.
The law empowers the president to block transactions between U.S. persons and foreign entities identified as supporting terrorist organizations. This includes imposing strict conditions on foreign financial institutions with accounts in the U.S. if they are found facilitating such transactions.
Johnsson suggests that the law’s broad applicability could push users toward Know Your Customer (KYC)-compliant and permissioned blockchain networks, effectively limiting them to regulated blockchains. He warns that this move could be perceived as an effort to control digital assets under the guise of combating terrorism.
The elements added by Warner that empower the president borrow from the Terrorism Financing Prevention Act, introduced in December 2023, which allows the U.S. Treasury to address emerging threats involving digital assets.
