Sen. Elizabeth Warren (D-Mass.) is once again taking aim at cryptocurrency legislation, this time warning that a bill making its way through Congress could become a backdoor for sanctions evasion.
On Wednesday, Warren cited a Fortune op-ed by Richard Nephew, a sanctions policy expert who previously served as Director for Iranian affairs at the National Security Council. The headline says it all: "As currently drafted, the Clarity Act is a ticket to sanctions evasion."
Nephew argues that the bill, in its current form, would strip away many of the "standard responsibilities" for financial institutions that were designed to "protect national security." He says it creates "significant loopholes" in anti-money laundering and counter-terrorism financing rules for decentralized finance and certain cryptocurrency firms, leaving them "vulnerable" to terrorists, sanctions evaders, and fraudsters.
And it's not just Iran. Nephew warns that North Korea, Russia, and China could also exploit these weaknesses to move money illicitly. He urges lawmakers not to pass legislation that makes it "harder for investigators to follow money related to terrorism and weapons proliferation."
Warren has been hammering this point for a while. Last month, she highlighted that Iran-affiliated groups are channeling billions of dollars in transactions through cryptocurrency platforms. The Clarity Act, she argues, would only make that easier.
But not everyone agrees. Sen. Cynthia Lummis (R-Wyo.) pushed back, pointing to sections in the bill that address the Bank Secrecy Act, anti-money laundering rules, and provisions that allow law enforcement to ask crypto exchanges and stablecoin companies to pause transactions suspected of being linked to illicit activity. In her view, the bill already has safeguards built in.
The Clarity Act is designed to create a regulatory framework for cryptocurrencies. It cleared the Senate Banking Committee in May, with some Democratic senators breaking ranks to vote alongside all Republicans. The bill now sits on the Senate Legislative Calendar, meaning it's eligible for a full floor vote. Polymarket bettors give it a 45% chance of being signed into law this year.
The timing is notable. The debate over the bill is unfolding as tensions between the U.S. and Iran escalate again. President Donald Trump said Wednesday that the tentative ceasefire and memorandum of understanding with Iran is over, warning of "much worse" consequences. That context gives Warren's warnings an extra edge—if the bill could be exploited by Iran, the stakes are higher than ever.
