The proposed U.S. cryptocurrency regulations could be counterproductive, the top Republican on the Senate Banking Committee said Thursday.

A draft counterpart rule from the Financial Crimes Enforcement Network (FinCEN) would place a heavy burden on cryptocurrency companies, but might not actually tackle illicit activity, wrote Sen. Pat Toomey (R-Pa.) In a brief. letter addressed to Secretary of the Treasury Janet Yellen.

He also called the draft Financial Action Task Force (FATF) guidelines “worrying”, noting that it contradicted existing FinCEN guidelines.

“Cryptocurrencies are expected to dramatically improve consumer privacy, access to financial services and the power to make decisions for themselves,” the letter said. “Some have argued that cryptocurrency is a technology that could be as revolutionary as the Internet.”

A FinCEN spokesperson said the agency was not commenting on the open rules, noting that the regulator had already extended the comment period twice.

“We appreciate Senator Toomey’s recognition of the ‘existing FinCEN guidelines, which have succeeded in bringing regulatory clarity to the United States,” “the spokesperson said.

The statement comes a day after Senator Elizabeth Warren (D-Mass.) Denounced bitcoin as a potential tool for criminals that also carries environmental and consumer protection concerns.

The controversial FinCEN rule was proposed by Yellen’s predecessor, former Treasury Secretary Steven Mnuchin, at the end of Donald Trump’s presidency. Under its provisions, all crypto exchanges or financial institutions would be required to keep name and physical address information for transactions over $ 3,000 and file reports for transactions over $ 10,000.

Opponents of the rule say it could impact decentralized finance (DeFi) products, as many smart contracts that store funds don’t require a name or address. DeFi aside, simply keeping excess records beyond typical Know Your Customer (KYC) requirements can prove to be a burden on smaller exchanges. A public comment period was extended just before Trump stepped down, and again after current President Joe Biden took office, but the current proposal is still pending.

“While I recognize that the FinCEN and FATF proposals aim to tackle the misuse of cryptocurrencies for illicit activities, if adopted they would have a negative impact on financial technology (‘fintech’), the fundamental privacy of Americans and efforts to combat activity, ”Toomey wrote. “I urge you to make some important revisions to them. “

Malicious actors might find it easier to act outside the regulated financial sector if these rules are implemented, Toomey argued.

The FATF’s proposed guidelines, which would also impose reporting requirements on DeFi, could also hurt the industry by imposing “onerous record keeping requirements” that do not apply to the US dollar, the senator wrote.

Beyond the burdens on the crypto industry, Toomey suggested that FinCEN consider modernizing the reporting requirements for currencies placed around the dollar. The reporting requirements for US dollar transactions are 40 years old and have been threshold-based since their implementation.

Law enforcement officials can more effectively track funds and analyze suspicious activity today, the lawmaker said.

Crypto is included in this bucket: Toomey pointed out that the FBI was recently able to recover much of the crypto paid by Colonial Pipeline during a ransomware attack.

“Instead of seeking to impose onerous regulatory requirements on cryptocurrencies, FinCEN should work with stakeholders and analytics companies to understand what existing and emerging capacities exist to identify illicit cryptocurrency activity,” said he wrote.

UPDATE (June 10, 22:37 UTC): Updated with comments from FinCEN.