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Treasury Asks Congress for Stronger Crypto Sanction Powers

U.S. Treasury

The U.S. Treasury Department wants more tools to curb terror financing.

Deputy Secretary Adewale O. Adeyemo is due to testify before the Senate Banking Committee Tuesday (April 9) and ask lawmakers for greater authority to block terrorist groups and state actors for using things like overseas cryptocurrency exchanges to fund their causes.

“Our problem is that actors are increasingly finding ways to hide their identities and move resources using virtual currency,” Adeyemo said in testimony released ahead of the hearing.

These groups continually “seek new ways to move their resources in light of the actions we are taking to cut them off from accessing the traditional financial system,” he added.

Per the testimony, the last year has seen Iran’s Quds Force send crypto to militant groups Hamas and the Palestinian Islamic Jihad in Gaza. Adeyemo said the Treasury took action against networks that sent smaller donations to Hamas.

“The more effective our targeting has been, the more reason there is for these terrorist groups to look into virtual assets,” Adeyemo said. “And, to be clear, it’s not only terrorist groups, but state actors like the DPRK and Russia as well.”

The Treasury department wants Congress to greenlight a “secondary sanctions tool” aimed at overseas digital-asset providers involved in illicit finance.

“While we have had some success in rooting out illicit finance in the digital asset ecosystem, we need to build an enforcement regime that is capable of preventing this activity as more terrorists, transnational criminals, and rogue states turn to digital assets,” Adeymo said.

Last month, the Treasury Department’s Office of Foreign Assets Control (OFAC) cited 13 Russia-linked FinTechs for allegedly using cryptocurrency to avoid sanctions.

“Russia is increasingly turning to alternative payment mechanisms to circumvent U.S. sanctions and continue to fund its war against Ukraine,” Brian Nelson, under secretary of the U.S. Treasury for terrorism and financial intelligence, said at the time.

“As the Kremlin seeks to leverage entities in the financial technology space, Treasury will continue to expose and disrupt the companies that seek to help sanctioned Russian financial institutions reconnect to the global financial system,” he added.

Days later, Bloomberg News reported that authorities in the U.S. and Great Britain were investigating more than $20 billion in cryptocurrency transfers that moved through an exchange based in Russia.