5 corruption gaps Congress must close in the Clarity Act
The most consequential crypto legislation in the world is moving forward in the U.S. Senate. As written, it leaves the United States exposed to money laundering, sanctions evasion, and conflicts of interest at the highest levels of government, argues Greytak.
The Decentralized Finance or “DeFi” gap
A platform or intermediary that moves, exchanges, conceals, or otherwise facilitates the transfer of value should not be able to avoid oversight simply by calling itself “decentralized.” North Korean hackers have repeatedly exploited mixers and other virtual asset laundering infrastructure to move stolen crypto and help fund the regime’s weapons programs. Treasury has found that Tornado Cash was used to launder more than $455 million stolen by the Lazarus Group, and U.N. experts have reported that North Korea later laundered another $147.5 million through the same platform. These are exactly the blind spots Congress needs to close: when a digital asset platform or intermediary performs financial functions, it should be subject to appropriate anti-money laundering and sanctions safeguards.
The so-called “Tornado Cash” loophole gap
Some crypto tools are designed to keep operating automatically, even when it becomes clear they are being used to launder money. When anti-money laundering rules attach to a person but evaporate the moment software performs the same task, the result is not a safeguard — it is a workaround written into the law. The urgency is not hypothetical. This past May, FinCEN warned U.S. banks that Iran’s Islamic Revolutionary Guard Corps had built a multi-jurisdictional shadow banking network — combining digital asset infrastructure with front companies and exchange houses — to launder oil proceeds and finance weapons procurement and terrorism. Congress should give the Treasury Department’s Office of Foreign Assets Control (OFAC) the explicit authority it needs to act against anonymizing tools used to evade sanctions.
The stablecoin gap
The GENIUS Act, passed earlier this year, established the core framework for stablecoin issuers, but allowed illicit actors to circumvent that framework via DeFi protocols, offshore platforms, mixers, or other services that move stablecoins without meaningful controls. Sanctioned Russian entities have already used stablecoins, including through platforms that impose no identity verification requirements, to move funds and sustain financial networks. The Clarity Act should require stablecoin issuers to implement reasonable ecosystem-wide monitoring to identify and report suspicious activity. Without that broader visibility, stablecoins risk becoming the preferred rail for sanctions evasion, fraud, ransomware, trafficking, and corruption-related money laundering.
