In response to alarming reports of Hamas receiving funding through crypto currencies, Senators Elizabeth Warren (D-Mass.), Roger Marshall (R-Kan.), and Representative Sean Casten (D-Ill.) rallied for action on Tuesday. They penned a letter to the White House and Treasury, calling for a comprehensive strategy to thwart the potential misuse of cryptocurrencies for terrorist financing.
Citing accounts, including in The Wall Street Journal, detailing the use of crypto in the recent attack on Israel, the lawmakers implored swift and resolute measures to combat illicit crypto activities. The letter garnered the support of 86 additional bipartisan signatories.
Concerns over the possibility of cryptocurrencies being employed for terrorist operations had already been on the radar of various Washington officials. The Treasury Department, Department of Justice, the Federal Bureau of Investigation, and other national security and law enforcement experts have consistently warned about the increasing use of digital assets for illicit activities, such as money laundering, ransomware attacks, trafficking, and terrorist financing.
On Wednesday, the Treasury Department announced sanctions against the operator of a Gaza Strip-based crypto exchange and senior Hamas figures responsible for managing the group’s investment portfolio. Deputy Treasury Secretary Wally Adeyemo affirmed the commitment to imposing further sanctions against the Hamas financial network, both independently and in cooperation with international partners.
The revelation of the involvement of crypto in funding Hamas has brought fresh attention to a bill introduced by Warren and Marshall last year. The Digital Asset Anti-Money Laundering Act seeks to institute new anti-money laundering regulations within the crypto sphere. The proposed legislation includes requirements for know-your-customer protocols, analogous to those prevalent in the banking sector, as well as measures to plug gaps enabling individuals to evade anti-money laundering and sanctions checks. Additionally, it would mandate banks to verify customer and counterparty identities, maintain records, and submit reports on specific transactions involving unhosted wallets.
Warren and Marshall are not the sole legislators scrutinizing the industry in light of the Israel attack. Senate Banking Committee Chair Sherrod Brown (D-Ohio) has expressed his intent to investigate the financing behind Hamas’s assaults, including potential involvement of cryptocurrency.
Crypto advocates are pushing back against the heightened scrutiny in Washington, arguing against the necessity of new anti-money laundering rules, contending that they may compel crypto businesses to relocate outside the U.S.
The industry is currently embroiled in multiple battles in Washington, clashing with regulators over the regulatory framework for digital assets and advocating for legislation to clarify the discrepancies between the rules of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission.
Critics of the Warren-Marshall bill assert that it fundamentally clashes with the operational principles of blockchain technology. They argue that the proposed requirements would be more extensive than those imposed on banks, effectively resulting in a de facto ban on crypto in the U.S.
Leading cryptocurrency exchange Coinbase (COIN) has indicated its cooperation with Treasury efforts to track Hamas-related activity. The company disclosed that the FBI sought its assistance in locating U.S. victims in Israel, believed to be in captivity. While Coinbase did possess accounts linked to some victims on the list, no activity was detected, and locations could not be determined.
Coinbase has also established ongoing collaboration with key law enforcement and government agencies to identify crypto addresses associated with sanctioned entities and prevent users from transacting with them. The exchange has compiled a database covering over 8 million crypto addresses linked to terrorism financing and other forms of illicit finance.
Coinbase’s Chief Legal Officer, Paul Grewal, emphasized the company’s unwavering commitment to eradicating illicit use of crypto, highlighting rigorous measures such as KYC checks, sanctions screening, SAR reporting, and robust law enforcement partnerships. He stressed the urgency of enacting sensible crypto legislation in the United States to ensure a thriving industry aligned with the rule of law and public safety.
Source: Yahoo Finance