US Bankers Push to Close Crypto AML “Loophole”

US banking industry group is pressing lawmakers to close what it describes as a regulatory gap around cryptocurrency, arguing that digital asset firms should face stronger anti money laundering obligations comparable to those imposed on banks.

The Bank Policy Institute, BPI, is urging US policymakers to tighten anti money laundering requirements for cryptocurrency businesses, arguing that gaps between traditional financial institutions and digital asset companies can create opportunities for criminals to move illicit funds.

The industry group’s position comes as US regulators and lawmakers continue debating how cryptocurrency should be regulated and how the Bank Secrecy Act, BSA, should apply to digital asset activity.

At the heart of the argument is a simple issue. Banks face extensive customer identification, transaction monitoring, suspicious activity reporting and record keeping requirements. Digital asset businesses can operate under different regulatory arrangements depending on the activity and jurisdiction.

For banks, that creates an uneven compliance environment.

The BPI argues that financial crime controls should be based on the activity and risk involved, rather than whether a business calls itself a bank, crypto company or technology platform.

Compliance Analysis

The debate matters because cryptocurrency has become increasingly embedded in the movement of money across borders.

A criminal does not necessarily need to choose between a bank account and a crypto wallet. Funds can move between both.

That creates a practical problem for compliance teams. A bank may identify a suspicious transaction involving a crypto platform, but the broader financial picture can be difficult to reconstruct if information requirements are inconsistent across the two sectors.

The proposed tightening therefore goes beyond competition between banks and crypto companies.

It is about closing regulatory gaps before criminals exploit them.

There is also a legitimate counterargument. Applying bank style requirements indiscriminately could impose heavy costs on smaller digital asset businesses and potentially push legitimate activity into less regulated jurisdictions.

The challenge for policymakers is finding the point where regulation is strong enough to prevent abuse without making compliance so expensive that responsible innovation becomes difficult.

For AML professionals, the direction of travel is clear. Digital assets are increasingly being treated as part of the mainstream financial crime risk environment.

AML Takeaway: The real loophole is not necessarily crypto itself. It is the gap between different regulatory regimes. If money can move seamlessly between banks, exchanges, wallets and other digital platforms, criminals will look for the weakest control point. Regulators increasingly have to close that gap.