US lawmakers urge tighter crypto industry restrictions to combat terrorism

US Senator Cynthia Lummis and Representative French Hill sent a letter to the DOJ asking to carefully assess the extent to which Binance and Tether provide material support and resources for terrorism.

When it comes to illicit finance, crypto is not the enemy — bad actors are.

I sent a letter asking DOJ to finish its investigation and consider criminal charges against Binance and Tether after reports they served as intermediaries for Hamas and engaged in illicit activities. pic.twitter.com/M3KGNFkpWc

— Senator Cynthia Lummis (@SenLummis) October 26, 2023

On March 27, the CFTC charged Binance with violating derivatives trading rules and operating without a license. The agency also alleges that the firm knew its clients included sanctioned individuals.

The initiative stemmed from an attack by Hamas on Israel. The politicians believe that the companies allegedly violated sanctions and banking secrecy laws.

According to the document, Tether fined $41 million for “false or misleading statements” about the full backing of the stablecoin USDT.

Hill and Lummis are generally sympathetic toward cryptocurrency, and in their letter said that digital assets and blockchain technology can “spur responsible innovation”.

“Many crypto-asset intermediaries strive to comply with US sanctions and anti-money-laundering laws, viewing these rules as necessary to unlock the prospects of the technology,” they said.

Chairman of the Senate Banking Committee Sherrod Brown stressed that authorities “will crack down on the use of cryptocurrency to finance terrorism and to evade sanctions” to support Israel.

Brown pledged to close off funding sources for illicit organisations by developing additional oversight measures for the digital-asset industry. He noted his fellow senator Elizabeth Warren, who also spoke out in favor of fighting terrorist financing through cryptocurrencies.

Warren, in an earlier speech, cited WSJ material, which states that Palestinian militants received at least $134 million in digital assets.

Chainalysis analysts said that when tallying crypto tied to terrorists, many external funds that passed through various payment services that interacted with criminals are incorrectly included in that pool. They also say that financing of illicit activity remains more heavily reliant on traditional methods.

“The administration should take additional steps to impose sanctions and devote resources to multilateral coordination with allies to track, freeze, and seize any assets linked to Hamas, and take the steps necessary to deprive terrorists of the ability to raise funds,” Brown added.

He also noted that attempts to block crypto-financing of terrorism often become a whack-a-mole game, as law enforcement can stop one transaction while criminals move to another platform.

Coin Metrics co‑founder Nick Carter posted a lengthy thread on X, criticizing the US government’s stance on cryptocurrencies. He noted that the senators were citing inaccurate WSJ data.

so just to recap

— WSJ journalists (Angus Berwick & Ian Talley) write a flurry of articles citing Elliptic data claiming that PIJ (Hamas affiliate) raised $93m in crypto (and cites BitOK claiming Hamas raised…

— nic ? carter (@nic__carter) October 25, 2023

“Because this letter was signed by as much as 20% of Congress, and all of it rests on a WSJ article that flags the national security apparatus against the crypto industry, we urgently deserve answers,” Carter said.

In his view, if the paper’s analysis is wrong, a big scandal is coming.

As noted, amid concerns about the use of digital currencies by cybercriminals and terrorists, the U.S. Treasury plans to designate cryptocurrency mixers “money-laundering hubs” that threaten national security.

Later, Elliptic analysts pointed out a small share of cryptocurrency in Hamas financing.