Regulating Crypto: Senators Push for Equal AML Rules

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In a significant move to combat illicit financial activities in the crypto world, the U.S. Treasury Department is set to designate international crypto mixers as potential money-laundering hubs. This decision, revealed by The Wall Street Journal, comes on the heels of alarming reports of terrorist groups, including Hamas, utilizing cryptocurrency as a financing tool for their operations.

The designation of crypto mixers as money-laundering hubs carries the weight of sanctions. These actions are expected to compel specific reporting requirements for financial transactions, enhancing transparency and accountability in the digital currency ecosystem.

Wally Adeyemo, the Deputy Treasury Secretary, emphasized the Treasury’s commitment to thwarting the exploitation of Convertible Virtual Currency (CVC) mixing by a wide spectrum of illicit actors, including state-affiliated cyber actors, cybercriminals, and terrorist organizations. The move underscores the government’s resolve to combat the misuse of all aspects of the CVC ecosystem, with a particular focus on groups like Hamas and the Palestinian Islamic Jihad.

This decision comes hot on the heels of revelations by The Wall Street Journal that Hamas, along with other militant groups, used digital currencies as a means of raising funds ahead of recent attacks in Israel. The news prompted more than a hundred lawmakers, spanning both Democratic and Republican parties, to express their concerns to the Biden administration. Their plea emphasized the need for swift action to curb illicit digital currency activities and protect national security.

Chainalysis Questions Terrorist Crypto Claims in Recent Reports

Senators Elizabeth Warren and Roger Marshall, representing both sides of the aisle, jointly penned an op-ed in The Wall Street Journal advocating for the application of anti-money-laundering regulations to “decentralized finance” companies. They argue that these entities should adhere to the same stringent rules applied to traditional banks.

Notably, Yaya Fanusie, Director of Anti-Money Laundering at the Crypto Council for Innovation, countered these arguments, highlighting that the U.S. already imposes regulations on crypto entities, including anti-money laundering and Know Your Customer checks.

Additionally, Chainalysis, a prominent blockchain analytics firm, questioned the accuracy of some recent reports regarding the use of digital currencies by terrorist groups. They asserted that such organizations often rely on traditional, fiat-based financial methods, such as financial institutions and shell companies, as their primary sources of financing.

The Treasury Department’s move to target crypto mixers signals a proactive approach to maintaining the integrity of the financial system, safeguarding national security, and ensuring that cryptocurrencies are not misused by illicit actors. As the crypto landscape evolves, the regulatory environment is adapting to address new challenges and maintain the balance between innovation and security.