U.S. Treasury Sounds Alarm on Crypto and Illicit Finance

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Key Takeaways:

  • The U.S. Treasury highlights cryptocurrency’s potential for illicit finance, signaling a need for urgent regulatory action.
  • Efforts are underway to prevent terrorist groups like Hamas from using digital assets.

A U.S. Treasury official is set to address House lawmakers on Wednesday about concerns regarding the use of cryptocurrencies in illicit finance. Brian Nelson, the Treasury’s Under Secretary for Terrorism and Financial Intelligence, will request enhanced authority to combat wrongdoing in the crypto space. 

He will emphasize the need for stronger legislation and increased support to tackle evolving challenges in illicit finance linked to cryptocurrencies.

This move comes amid growing attention from Washington lawmakers, including Sen. Elizabeth Warren, who has been advocating for the Digital Asset Anti-Money Laundering Act (DAAMLA). This bill aims to combat the illicit use of crypto assets for money laundering and terrorism financing.

Nelson highlighted the Treasury’s efforts to monitor tactics and technologies used by unlawful groups to generate and transfer funds. While terrorists’ use of digital assets remains a small fraction compared to traditional money transfer methods, Nelson emphasized the potential threat posed by such activities.

The Treasury’s commitment to this cause was highlighted by the release of its 2024 National Risk Assessments on Money Laundering, Terrorist Financing, and Proliferation Financing. These reports underscored the persistent threat of illicit finance within the U.S., noting a shift towards using virtual assets.

Nelson also highlighted the unit’s focus on Hamas-related activities, mentioning recent multilateral action against several of Hamas’s funds transfer networks. The Treasury has been working on a framework to combat terrorism financing that “mitigates illicit finance risks while promoting responsible innovation.”

While the Treasury has tools to address some issues, including authorities to hold firms accountable for not complying with the Bank Secrecy Act, Nelson’s testimony indicates a push for increased authority to address crypto-related illicit finance more effectively.

The Treasury’s concerns regarding cryptocurrencies and illicit finance are well-founded. In recent years, the agency has made suggestions to lawmakers to enhance its powers, including proposing new sanctions to target illicit actors in the cryptocurrency sector. 

Additionally, the Treasury has emphasized the need for increased oversight of stablecoins, a type of cryptocurrency pegged to a stable asset, such as a fiat currency. While stablecoins were not explicitly mentioned in Brian Nelson’s testimony, their potential for misuse in illicit finance is a growing concern that the Treasury seeks to address.

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Aadrika Sharma
Aadrika Sharma

I enjoy writing and try to learn new things every passing day!

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