Crypto Industry Challenges Terrorist Financing Allegations in House Hearing
On Wednesday, a panel of witnesses appeared before the House Financial Services committee to defend the crypto industry against allegations of enabling terrorist financing – an issue that has attracted attention in light of
Hamas’s use of digital currencies to receive large sums of money from Iran. As Rep. Brad Sherman (D-CA-32) adroitly
pointed out, though, four of the five witnesses worked for businesses which rely on the continued existence of the crypto ecosystem, with the sole exception being Alison Jimenez, president of Dynamic Securities Analytics, Inc. With that in mind, it’s not surprising that pro-crypto narratives dominated the hearing, with witnesses attempting to
cast doubt on the true prevalence of crypto terrorist financing and
pointing to the role of digital assets in raising funds for Ukraine. When
pushed by Rep. Bill Foster (D-IL-11), crypto-aligned witnesses
conceded that, using unregulated offshore exchanges, bad actors are currently more than capable of laundering money and avoiding US sanctions.
Unfortunately, offshore exchanges are only part of the problem. Last week, CfA
urged Sens. Sherrod Brown (D-OH) and Elizabeth Warren (D-MA) to investigate the role of US-based crypto company Circle in the financing of terrorist operations. Circle issues its USDC stablecoin on multiple foreign cryptocurrency exchanges, including one which was
targeted by Israel’s National Bureau for Counter Terror Financing. By issuing its currency on these under-regulated exchanges, Circle appears to be enabling “chain hopping” – a practice which the Treasury’s Financial Crimes Enforcement Network
identifies as a means of money laundering. Within the past month, the agency has indicated that it may use powers granted to it by the Patriot Act to regulate these suspicious, high-risk crypto transactions.