The U.S. Defense Act of 2024 removes encryption rules from legislation

Lawmakers have removed the cryptocurrency clause from the National Defense Authorization Act of 2024, which is about to go to a final vote.

The National Defense Authorization Act of 2024 will almost certainly be approved in the absence of new rules for cryptocurrencies after negotiators removed the encrypted language to facilitate passage by the Senate and House of Representatives.

Although the legislation retains broad provisions for existing security programs, it avoids extending the scope of regulation to digital assets. This decision delays any potential new cryptocurrency regulations until possible future action by Congress.

According to the Senate Armed Services Committee, the bill omits a Senate amendment that would require the Treasury Secretary to establish a review process to assess financial institutions’ cryptocurrency money laundering controls and compliance.

Another rejected Senate proposal would force the Treasury Secretary to submit a report and briefing to a congressional committee evaluating the technology that underpins anonymous crypto transactions and the legislative and regulatory approaches of other countries.

With cryptocurrency regulations on hold, the threshold for passage by both houses of Congress has been lowered. However, despite the lack of strengthened regulation of digital assets, broad military policy remains unchanged.

Focus on markups for core defense priorities

The National Defense Authorization Act (NDAA) is legislation passed annually by Congress to authorize funding and set policy for U.S. military and defense programs. As one of the few major bills that routinely becomes law each year, the National Defense Authorization Act sets out the level of expenditure and management priorities for all branches of the armed forces and the agencies of the Department of Defence.

Since the bill is often considered legislation that must be passed, legislators often try to add additional provisions to its language. These usually face intense scrutiny before the final vote.

Instead, negotiators focused only on core military priorities. These include increases in troop salaries, weapons upgrades, domestic surveillance expansions, semiconductor projects, naval shipbuilding programs, and similar defense policy provisions.

Military officials now want to lock in $886 billion for such priorities while sidestepping asset transparency rules that were proposed but ultimately shelved in lengthy consensus negotiations. It also continues a broad existing military policy, but does not have the recently proposed expansion that assigns more regulatory responsibilities to cryptocurrencies.

With the removal of cryptocurrency-related provisions, the NDAA is now moving towards a final vote and the president’s signature.