US Treasury Deputy Secretary Wally Adeyemo has urged Congress to provide regulatory tools to combat illicit finance related to cryptocurrencies.
In a hearing before the Senate Banking, Housing and Urban Affairs Committee, Adeyemo expressed concerns that terrorist groups, as well as state actors like Russia and North Korea, are increasingly using virtual currencies and digital assets to hide their identities and move resources.
While acknowledging some success in detecting illicit finance activities, Adeyemo emphasized the need to expand enforcement efforts to prevent such actions by “malign actors.”
“While we continue to assess that terrorists prefer to use traditional financial products and services, we fear that without congressional action to provide us with the necessary tools, the use of virtual assets by these actors will only grow,” he said.
Adeyemo Asks for Crypto Regulations
Adeyemo highlighted the expanding use of virtual assets by these groups and warned that without congressional action, their adoption would continue to grow.
He cited examples such as North Korea using complex cyber heists to acquire and launder illicit revenue, and Russia resorting to alternative payment mechanisms like the stablecoin tether to evade sanctions and finance its conflicts.
To address these challenges, Adeyemo called on Congress to pass legislation that strengthens tools to target foreign digital asset providers facilitating illicit finance, including the imposition of secondary sanctions.
1/ Tomorrow, Dep. Sec. Adeyemo will testify before the Senate Banking Committee on the issue of illicit finance. With the Dep. Sec.’s primary focus on crypto’s role in terror financing, we implore Congress to consider all of the facts.
https://t.co/2chyffTKhH
— Blockchain Association (@BlockchainAssn) April 8, 2024
Furthermore, Adeyemo stressed the importance of closing regulatory gaps and extending authorities to cover entities like virtual asset wallet providers and cryptocurrency exchanges that emerged after current laws were enacted.
He also emphasized the need to address jurisdictional risks posed by offshore cryptocurrency platforms to safeguard US national security.
Coinbase Global and Circle Internet Financial, prominent cryptocurrency firms, also called upon Senate Majority Leader Chuck Schumer and House Speaker Mitch McConnell to enact regulations for stablecoins and improve the overall digital asset market structure.
They highlighted the risks of regulatory arbitrage due to the lack of regulatory clarity and urged the extension of anti-money laundering and sanctions regulations to cover foreign stablecoin issuers referencing the US dollar.
Adeyemo confirmed that the Treasury had previously recommended reforms to the committee and expressed the department’s willingness to work alongside lawmakers to address these issues.
UN Highlights Tether Role in Illicit Financing
A recent United Nations report highlighted Tron’s popularity among cyber fraud and money laundering activities in Southeast Asia.
According to the report, authorities have observed a rapid growth in sophisticated, high-speed money laundering teams that specialize in utilizing Tether for underground transactions.
It pointed out that online gambling platforms, particularly those operating illegally, have become popular avenues for cryptocurrency-based money launderers, with USDT being a favored choice.
Tether has refuted these claims, emphasizing its collaboration with law enforcement and the traceability of its token.
In response to the UN report, Tether said that its collaboration with global law enforcement, including the Department of Justice (DOJ), the Federal Bureau of Investigation (FBI), and the United States Secret Service (USSS), has resulted in unparalleled monitoring capabilities, surpassing traditional banking systems.
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