Sen. Blumenthal called crypto 'currency of choice for crooks' at a hearing, citing a romance scam victim. The CLARITY Act faces Democratic pushback.
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Senator Richard Blumenthal called digital assets the preferred financial tool of criminals, using a Senate hearing to push back against the CLARITY Act. The Connecticut Democrat posted his remarks on X alongside testimony from a victim who lost most of her savings in a 2022 romance scam.
Lori Flowers, a pharmaceutical executive, told the panel that fraudsters used blockchain networks to move stolen funds quickly and irreversibly. The speed of settlement makes it nearly impossible for law enforcement to freeze assets, she said. Blumenthal argued that decentralized networks facilitate money laundering and act as a catalyst for fraud schemes across the U.S.
The hearing comes as Congress debates the CLARITY Act, a Republican-backed bill that would create federal rules for digital assets. Blumenthal warned the current draft could strip state attorneys general of investigative authority. Elizabeth Warren, a ranking member of the Senate Banking Committee, described the latest version as a document with significant legal loopholes. Senators Chris Van Hollen and Lisa Blunt Rochester said the proposal lacks minimum consumer protections.
The legislative clash is unfolding against rising political tensions ahead of the midterm elections. Progressive figures including Bernie Sanders have intensified criticism of the tech and digital asset industry's influence on the electoral process. Crypto-sector political action committees such as Fairshake and its affiliates are among the biggest financial backers of congressional campaigns.
A separate Bloomberg report this week detailed how scammers are now using fake IRS letters sent through physical mail to steal investor information. The warning adds to the pressure on lawmakers to address fraud without stifling innovation.
The Senate Banking Committee plans to review campaign finance oversight and consumer protection clauses in the CLARITY Act during its next session. No date has been set for a floor vote.
For more on the legislative timeline, see CLARITY Act odds sink to 27% after Senate delays crypto bill and CLARITY Act delay risks US crypto lead, Haridopolos warns.
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