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US Treasury urges congressional action against crypto-linked illicit finance

US Treasury urges congressional action against crypto-linked illicit finance

With the cryptocurrency industry evolving and seeping into the mainstream, it has increasingly become one of the innovative ways for terrorist groups to move resources and, as such, the target of growing regulatory scrutiny and calls for more strict control over the sector.

In this context, Adewale O. Adeyemo, the Deputy Secretary of the United States Treasury Department, has urged the US Congress to provide the government with “necessary tools” to counter illicit finance, terrorism, and sanctions evasion tied to crypto assets, according to the testimony on April 9.

Crypto-linked terrorist financing

Specifically, the US Treasury Deputy Secretary has told the Senate Banking, Housing, and Urban Affairs Committee that terrorist groups around the world, including al-Qaeda, have been trying to make use of crypto assets in the past several years, drawing attention to some of the prominent examples.

“Five years ago, al-Qaeda and affiliated terrorist groups, largely based out of Syria, operated a Bitcoin (BTC) money laundering network using social media platforms to solicit cryptocurrency donations.”

More recently, Adeyemo pointed out, the Islamic Revolutionary Guard Corps – Qods Force (IRGC-QF) has transferred digital assets to Hamas and the Palestinian Islamic Jihad (PIJ) in Gaza, and Hamas has used cryptos “to solicit small-dollar donations,” where the Treasury managed to intervene.

And while the Treasury has had some success in uprooting illicit finance in the digital asset ecosystem, he argues that:

“We need to build an enforcement regime that is capable of preventing this activity as more terrorists, transnational criminals, and rogue states turn to digital assets. That’s why we sent the Committee proposals to strengthen counter-terrorist financing authorities.”

To this end, he suggests three reforms – the introduction of a secondary sanctions tool for foreign crypto providers facilitating illicit finance, modernizing and closing gaps in existing authorities by expanding their reach, and addressing “jurisdictional risk from offshore cryptocurrency platforms.”

Crypto regulation measures

Elsewhere, a newly introduced crypto-related regulation in the European Union (EU) stipulates a prohibition on crypto payments to hosted wallets using unidentified self-custory crypto wallets, as part of the new set of anti-money laundering (AML) laws on the continent.

At the same time, the pro-Bitcoin, anti-CBDC (central bank digital currencies) independent presidential candidate Robert F. Kennedy Jr., has accused members of the Congress of “being paid” to ban Bitcoin by “the big globalist banking monopolies that are making money on inflation.”

Indeed, he was referring to the support from both sides of the US political spectrum for Senator Elizabeth Warren’s proposed bill to tighten regulations within the crypto space, including Lindsay Graham, a Republican, Angus King, an Independent, and Joe Manchin, a Democrat turned Independent.

Meanwhile, the US Internal Revenue Service (IRS) has brought in two private-sector experts to assist in its efforts to address the complexities of the rapidly evolving crypto sector and intensify enforcement in this area, as Finbold reported on February 28.

Ultimately, time will tell whether the regulatory situation resolves beneficially or negatively for the growing crypto industry, or it ends up somewhere in between, like in the example of the ruling in the case between the US Securities and Exchange Commission (SEC) and blockchain company Ripple.

Namely, the presiding judge in this long-running courtroom battle, Analisa Torres, has ruled against the SEC’s allegation that Ripple’s sales of the XRP token to retail buyers constituted securities sales, but sales to institutional buyers did satisfy the requirements for her to rule them as securities.

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