MM has a couple newsy exclusives on crypto and artificial intelligence to kick off your day. First up is a look at Sen. Elizabeth Warren’s latest crypto target: The revolving door between the worlds of national security and digital assets. MM reported last month on how the crypto industry is flexing a small army of former nat sec, defense and law enforcement officials as it responds to growing scrutiny about the role digital currencies play in funding terrorism and other financial crimes. It got the attention of Warren, who has been rallying lawmakers to beef up anti-money laundering safeguards in the crypto market. In new letters sent Monday, she asked Coinbase, the Blockchain Association and Coin Center about the extent to which they employ former military and civilian officials, as well as ex-members of Congress — plus details on the work they’ve been doing. She cited Coinbases’s recruitment of one-time Defense Secretary Mark Esper, former Sen. Pat Toomey and former Reps. Tim Ryan and Sean Patrick Maloney, who has also been nominated to serve as the U.S. representative to the OECD. They serve on the company's Global Advisory Council. “This abuse of the revolving door is appalling, revealing that the crypto industry is spending millions to give itself a veneer of legitimacy while fighting tooth and nail to stonewall common sense rules designed to restrict the use of crypto for terror financing – rules that could cut into crypto company profits,” Warren said. “It also reveals significant gaps in the nation’s ethics laws.” Blockchain Association CEO Kristin Smith said in response that “people are drawn to work in the crypto industry because they value freedom, sovereignty of the individual, and permissionless innovation.” Coinbase head of U.S. policy Kara Calvert said the national security and law enforcement experts that the crypto exchange employs “do not deserve to be maligned as they work to keep our nation strong and safe." “Engaging like-minded experts to advocate against legislative proposals that one sincerely believes are unconstitutional and detrimental to the nation's welfare does not constitute 'undermining bipartisan efforts in Congress,'” Coin Center executive director Jerry Brito said, quoting Warren’s letter. “Rather, it is the exercise of the fundamental right to freely associate and petition the government.” Next up, MM has a first look at a new bipartisan Senate push to address potential financial risks from AI. Sens. Mark Warner and John Kennedy are introducing legislation that would require the Financial Stability Oversight Council – a panel of top regulators led by Treasury – to coordinate a response to market stability threats posed by AI, such as the use of deepfakes, and recommend ways to close regulatory gaps. The bill would also allow the SEC to pursue treble penalties for market manipulation and fraud involving AI, and it would give credit union and housing regulators authority to oversee AI service providers. Kennedy, a Louisiana Republican who sits on Senate Banking with Warner, said the bill “would help ensure that AI threats do not put Americans’ investments and retirement dreams at risk.” Warner has emerged as one of the most outspoken members of Congress when it comes to AI risks that loom for Wall Street. He has been teasing the legislation for weeks. The Virginia Democrat, a former executive and venture capitalist, told a financial regulation conference last month that he was surprised by the lack of urgency from industry when it comes to addressing the possible dangers of AI. “AI has tremendous potential but also enormous disruptive power across a variety of fields and industries – perhaps none more so than our financial markets,” he said in a statement on his bill. “The time to address those vulnerabilities is now.” It’s Tuesday — MM would love to hear from you during this pre-holiday week. Send tips to zwarmbrodt@politico.com.
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