It’s time to have a serious conversation about the ease of illicit activity in the current cryptocurrency ecosystem.
With the ability to anonymously move money around the globe in an instant and a lack of basic regulation in place to prevent illegal use, crypto makes it easy to get significant amounts of money to bad actors for criminal purposes.
Last year, illicit crypto use hit over $20 billion. North Korean hackers explicitly targeted crypto to fund their missile program, stealing over $1.7 billion in 2022 alone. Russia has used crypto to avoid many of the economic sanctions placed on it in response to its invasion of Ukraine.
In recent weeks, the illicit uses of crypto have gained increased national attention following the tragic attack on Israel by Hamas, as the Wall Street Journal reports that Hamas and the Palestinian Islamic Jihad received more than $130 million through crypto networks from August 2021 – June 2023. That means that the known annual funding through crypto is almost as large as the $100 million per year that was estimated by the Pompeo State Department. Make no mistake — funding from crypto helped Hamas execute these attacks.
Congress must act to prevent future crypto-financed terrorism.
Sen. Elizabeth Warren (D-Mass.) introduced the bipartisan Digital Asset Anti-Money Laundering Act in an effort to mitigate the illicit finance risks posed by crypto. In the coming weeks, I intend to introduce companion legislation in the House. I urge my colleagues in the House, both Democrats and Republicans, to pass it and ensure terrorist groups can’t receive financing through cryptocurrency.
But Congress also must reverse recent committee-level measures that—if passed into law—would make it much easier for illicit activity to occur using cryptocurrency.
The stablecoin legislation passed by the House Financial Services Committee earlier this year failed to include an amendment from Rep. Bill Foster (D-Ill.) that would have subjected stablecoins to necessary anti-money laundering supervision.
Even worse, the committee passed on a party-line basis legislation introduced by Rep. Warren Davidson (R-Ohio) that would restrict federal regulators ability detect criminal activity using self-hosted wallets, as well as a bill introduced by Rep. Tom Emmer (R-Minn.) to exempt the money transfer agents that use crypto from regulatory supervision, making it nearly impossible for federal regulators to identify criminals who use crypto to launder money. These bills would make it easier for terrorist groups like Hamas to evade international financial supervision. We cannot afford another Oct. 7, and therefore cannot allow those bills to become law.
It’s also time for the crypto industry to put safety first. Since 2020, the industry has spent more than $45 million on its lobbying efforts, with nearly $6.6 million of that being spent in the second quarter of this year alone. Those efforts led directly to the bills introduced above. Given the damage to their own reputation, they need to call to rescind those bills and replace them with ones that provide no differential regulation between alternative money transfer systems.
The attack on Israel by Hamas has once again put the need for oversight on crypto front and center. Congress and industry have an obligation to ensure that crypto is held to the same standard as the traditional financial system when it comes to illicit money movement. Anything less puts terrorists first.
Sean Casten represents the 6th District of Illinois and is a member of the House Financial Services Committee.