Treasury Sanctions Terrorists, Sees Crypto Involvement; Judiciary Gets Hagerty AML Legislation

more sanctions, crypto involved

The U.S. Treasury’s Office of Foreign Assets Control (OFAC) has imposed a new fifth round of sanctions against members of the terrorist organization Hamas coming out of the October 7 terror attacks in Israel.

Brian Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence, said in a release, “Hamas has sought to leverage a variety of financial transfer mechanisms, including the exploitation of cryptocurrency, to channel funds to support the group’s terrorist activities.”

The latest action isn’t specific about the dollar levels involved in the terrorist financing identified and how much of it was cryptocurrency. Regarding one of the implicated terrorist financial networks: “Hamas has directly co-opted and utilized some corrupt money exchanges in both the West Bank and Gaza to launder funds for the terrorist group. Since at least 2020, Hamas has also used cryptocurrency to transfer some funding in support of operational costs in the West Bank as a means of mitigating the risks of physically moving cash, circumventing border crossings, and evading monitoring by authorities.”

Read the press release: “U.S., UK, and Australia Target Additional Hamas Financial Networks and Facilitators of Virtual Currency Transfers” –

SEC was SIM-swapped

Fortune’s Leo Schwartz reports that a “SIM swap” was to blame for the X account hack which prematurely announced that Bitcoin spot market ETFs had been approved by the Securities and Exchange Commission (SEC). An SEC spokesperson told Schwartz in a statement that “the agency had disabled multifactor authentication in July 2023 due to ‘issues accessing the account,’ but has since re-enabled it on all available social media accounts.” Read more on Yahoo Finance.

Judiciary, not Banking

Senator Bill Hagerty’s (R, TN) new illicit finance bill for digital assets, “Preventing Illicit Finance Through Partnership Act of 2024” [S.3603], and co-sponsored by Senator Cynthia Lummis (R, WY), hit the database and shows the bill is not going to Senate Banking (where both Senators are committee members) or Senate Finance. Instead it is referred to Senate Judiciary led by its Chair, Senator Dick Durbin (D, IL), and Ranking Member, Senator Lindsay Graham (R, SC). (h/t Cap Hill Crypto)

what you should know: Both Durbin and Graham are co-sponsors of Senator Elizabeth Warren’s (D, MA) Digital Asset Anti-Money Laundering Act [S.2669], too.  In contrast, DAAML has been referred to Senate Banking.

The Senate Committees are heating up when it comes to digital assets.

Senate Finance has been looking at crypto taxes -plus Lummis-Gillibrand was referred there in the 118th Congress to name a couple of digital asset initiatives.

Senate Agriculture, former host of the ill-fated DCCPA, would seem to be in the sights of the digital asset market structure bill (a.k.a. FIT 21) currently percolating in the House.

letter – meta & digital assets

With visions of Libra swirling, House Financial Services Ranking Member Maxine Waters (D, CA) sent off a Congressional letter with questions for Meta CEO Mark Zuckerberg regarding “Meta’s filing of five trademark applications related to digital assets services and blockchain technology and what those applications could portend for Meta’s entry into cryptocurrency.” Read the release and letter.

The 5 trademarks mentioned are fascinating. The first is “#97320153: Design and development of computer hardware and software services related to blockchain, virtual currency, digital currency, cryptocurrency, and digital assets.” See it on USPTO’s website. Get the other four in the release.

what you should know: This is another example of big tech and the Biden Administration butting heads – let alone fallout from Libra (a.k.a. Diem), which Meta was forced to jettison through a firesale to now-defunct Silivergate Bank in 2022.

digital asset taxes

The Internal Revenue Service reminded taxpayers that they need to pay taxes on their digital assets in a news release yesterday.  IRS forms such as the 1040 form now include a question that asks, “At any time during 2023, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?” Read more.

Republican commish

In a speech largely unrelated to digital assets yesterday, Commissioner Mark Uyeda (R) of the Securities and Exchange Commission (SEC) offered a tongue-in-cheek comment to his Democratic colleagues on the SEC’s past ability for creating needed regulation. “Imagine that — the Commission engaging in notice-and-comment rulemaking, including a re-proposal, to address regulatory uncertainty and ambiguity following judicial decisions. Yet, apparently, this approach is not feasible when it comes to crypto and digital assets.” Read more.

what you should know: If a Republican majority were to take over the SEC (presuming a Republican in the White House), “pro-crypto” Republican commissioner comments would likely fade into the reeds and, perhaps, get replaced by the minority – i.e. “anti-crypto” Democratic commissioner comments.

latest lawyering

proposal: “FinCEN Proposes New Regulation to Enhance Transparency in Convertible Virtual Currency Mixing and Combat Terrorist Financing (October 19) –

    • prepared comments from Coin Center: “[Coin Center] stands ready to help challenge such an unjust application of the PATRIOT Act to ordinary Americans engaged in legitimate efforts to protect their privacy.” – More.
    • prepared comments from DeFi Education Fund: In 6 parts plus 2 addendum, “Part 6 argues that FinCEN should not finalize this rule and should instead allow for the development of privacy-preserving technological solutions.” – More.
    • prepared comments from Paradigm: “FinCEN should withdraw or materially curtail the Proposed Rule and, instead of creating a new reporting regime applicable to a broad range of general technologies and activities, use the tools it already has to directly address bad actors.” – More.
    • prepared comments from Coinbase: “…Coinbase fully supports effective regulation developed with the input and coordination of industry members. But we do not believe this proposed [notice of proposed rulemaking] is an effective regulation…” – More.

court case: “Wyoming Effort to Support Crypto-Focused Banks Set Back by Fed Concerns About Industry” (September 5) – The Wall Street Journal

going global – Canada

Last week, the Canadian Securities Authority (the CSA is Canada’s SEC) put out a new request for comment, or consultation, asking for feedback on rules for investment funds with crypto assets. See the CSA proposal (PDF). Comments are due by April 17.

Ledger Insights takes a deeper look at the proposal and notes, among other elements, non-fungible tokens or NFTs are banned. “[The CSA] considers collectibles inappropriate for a financial investment, although we’d note some NFTs are more financial. However, the CSA states its primary concerns are about liquidity and valuation of NFTs. This is a topic it expects to explore during the consultation.” Read more.

still more tips

Binance, SEC face off over regulator’s crypto oversight – Reuters

Crypto Startup Figure Seeks SEC Approval to Issue Interest-Bearing Stablecoin – Bloomberg

FTX Sold About $1B of Grayscale’s Bitcoin ETF, Explaining Much of Outflow: Sources – CoinDesk

Company behind Terra crypto collapse files for US bankruptcy protection – Financial Times

Laundromats and VPNs: How China’s Crypto Traders Are Evading the Rules (Jan. 18) – The Wall Street Journal