US Treasury Sets Sights on Crypto Mixers for Money Laundering, Citing Terrorist Links

The United States Treasury Department has revealed its intentions to designate international cryptocurrency mixers as centers for money laundering, prompted by their use by terrorist organizations like Hamas. This move, reported by The Wall Street Journal, is seen as a form of financial sanction and will necessitate specific reporting requirements for financial transactions.

Treasury Department’s Stance on Crypto Mixers

Deputy Treasury Secretary Wally Adeyemo conveyed the Treasury Department’s commitment to combatting the exploitation of Convertible Virtual Currency (CVC) mixing by various illicit actors. These include state-affiliated cyber actors, cybercriminals, and terrorist groups such as Hamas and Palestinian Islamic Jihad. He emphasized the broader efforts to combat the illicit use of all components within the CVC ecosystem related to terrorist activities.

However, the Treasury Department has not provided immediate comments on these developments in response to queries from The Block.

Background on the Designation

This designation follows a recent report by The Wall Street Journal, which revealed that Hamas and other militant groups utilized cryptocurrencies as a financing tool leading up to attacks in Israel. In response to these findings, Senator Elizabeth Warren, along with over a hundred other lawmakers spanning both Democratic and Republican parties, expressed their concerns regarding how Hamas raised millions of dollars through cryptocurrencies. They conveyed these concerns in a letter addressed to the Biden administration.

The letter urged Congress to take swift and decisive action in addressing illicit crypto activity, emphasizing the need to protect national security, as well as the security of the country’s allies.

Senator Warren’s Op-Ed

Senator Elizabeth Warren reinforced these concerns in an op-ed published in The Wall Street Journal. In the op-ed, she advocated for decentralized finance companies to be subject to the same anti-money laundering regulations as traditional banks. This viewpoint was shared by Senator Roger Marshall, a Republican from Kansas.

Counterarguments and Pushback

Yaya Fanusie, the Director of Anti-Money Laundering at the Crypto Council for Innovation, offered a counter perspective, asserting that cryptocurrency is already regulated in the United States and adheres to anti-money laundering rules. He highlighted that exchanges and financial intermediaries in the U.S. operate as money service businesses (MSBs) under BSA regulations. As MSBs, they are mandated to register with FinCEN and report suspicious activities indicative of potential criminal conduct. This involves conducting Anti-Money Laundering (AML) and Know Your Customer (KYC) checks, as well as sanctions screening on all customers.

Chainalysis’s Insights

Chainalysis, a blockchain analysis firm, contributed to the discourse by suggesting that recent reports concerning the use of cryptocurrencies by terrorist groups might be overstating metrics and relying on flawed analyses. The company underscored that terrorist organizations have historically relied on traditional fiat-based methods, including financial institutions, hawalas, and shell companies, as their primary means of financing.

The unfolding developments highlight the complex and evolving landscape of cryptocurrency regulations and their intersection with national security concerns.