letter from Sen. Warren
A new Congressional letter originating with Senator Elizabeth Warren (D, MA) and dated Tuesday (see it) makes requests of the White House and Treasury and expresses concerns about terrorist financing using crypto.
A footnote references last week’s Wall Street Journal article connecting the terrorist attacks in Israel to crypto donations received by the terrorist organization Hamas.
The letter and its questions align with the Senator’s [S.2669] Digital Asset Money Laundering Act” co-sponsored by Senator Roger Marshall (R, KS) and a bipartisan list of Senators. Though the questions may be rhetorical (“What steps is the Biden Administration taking to address the use of cryptocurrency by terrorist organizations, including but not limited to Hamas, PIJ, and Hezbollah?”) given Warren’s legislation, answers are requested by October 31.
letter from Sen. Warren – signers
For emphasis on urgency, Sen. Warren reached across Congress and collected a list of 105 signatures (29 Senators and 76 Members of the House) including her own for the letter. Only two were Republicans: Sen. Marshall and Senator John Kennedy (LA).
Notable signers among Democrats include Rep. Jim Himes (CT) and Rep. Josh Gottheimer. Both were “yes” votes on the digital asset market structure and stablecoin bills coming out of the House Financial Services Committee in July.
Notable non-signers among Democrats include House Financial Services (HFS) Ranking Member Maxine Waters (CA) and Senator Kirsten Gillibrand (NY).
Waters has publicly supported Democratic leadership’s efforts to stymie digital assets legislation in HFS in the 118th Congress.
Meanwhile, Senator Gillibrand along with Senator Cynthia Lummis (R, WY) have tried to build a bridge to Senator Warren and anti-crypto legislators with the NDAA amendment among other efforts. Gillibrand is also a co-sponsor of the Senate version of the Financial Technology Protection Act [S.1340] along with Senator Ted Budd (R, NC). The bill was re-introduced in April in both Houses and seeks “to establish an Independent Financial Technology Working Group to Combat Terrorism and Illicit Financing.”
more tips:
Bipartisan group presses Biden for crypto crackdown after Hamas attacks – Punchbowl News
Treasury sanctions Hamas
Also yesterday, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) announced that it had imposed new “sanctions on ten key Hamas terrorist group members, operatives, and financial facilitators in Gaza and elsewhere including Sudan, Türkiye, Algeria, and Qatar.” Read the details.
Among the resources for combatting terrorist financing, the press release lists “Action Plan to Address Illicit Financing Risks of Digital Assets,” which was delivered last Fall in response to President Joseph Biden’s Executive Order on Digital Assets.
letter from Sen. Warren – CANSEE
Policy executive Alexander Grieve of venture firm Paradigm reacted to Sen. Warren’s letter yesterday and noted on X, “This comes amid reports that [the Senate Banking Committee] may start looking at crypto legislation. The CANSEE authors seem to think there might be a combo of their bill and Warren-Marshall, but other reports suggest Chair Brown’s recent comments refer to stablecoins and/or Lummis-Gillibrand… The Senate Banking docket is pretty full through the end of the year, and there’s also no guarantee the government gets funded by Nov 17– so we’re in wait and see mode here.” Read more.
CANSEE is the “Crypto-Asset National Security Enhancement Act of 2023” [S.2355] introduced by Senate Banking Committee member Sen. Jack Reed (D, RI) with bipartisan support in July. CANSEE provisions require stringent anti-money laundering standards in decentralized finance (DeFi) . Industry think tank CoinCenter has said about the legislation, “It is effectively a ban on decentralized software development that cedes an innovative sector to the rest of the world.”
more tips:
Politico’s Eleanor Mueller wrote on Tuesday that CANSEE and Sen. Warren’s AML bill could merge: “Senate Banking Chair Sherrod Brown (D, OH) is considering combining them amid reports that Hamas used crypto to ‘plant or to wash their money coming in from overseas,’ [Senator] Reed said.” Senate Banking hearings on terrorist financing with crypto are also a possibility, reports Mueller.
Senate Banking hearings on terrorist financing with crypto are also a possibility, reported Mueller.
letter from Sen. Warren – Cato
Cato Institute’s Norbert Michel offered his reaction to the letter on his organization’s blog: “In a perfect world, it would be out of bounds to use incidents of horrific violence against innocent people to revive an otherwise unrelated political agenda. Nonetheless, it seems that Senator Elizabeth Warren (D‑MA) and her colleagues are going to use the recent violence in Israel to gather support for the Digital Asset Anti‐Money Laundering Act, a bill Warren’s been hawking for months.”
Read his piece titled: “A Crackdown on Crypto Won’t Stop Hamas.”
Michel appeared as a Republican witness at a recent HFS Digital Assets, Financial Technology and Inclusion Subcommittee hearing on Central Bank Digital Currencies (CBDCs) in mid-September.
letter from Sen. Warren – Coinbase
Meanwhile, on X yesterday, Coinbase Chief Policy Office Faryar Shirzad pointed to a new company blog post explaining the depth to which his company makes AML compliance a priority. He tweeted, in part, “Facts: All US based crypto exchanges like [Coinbase] must register with US Treasury and comply with the Bank Secrecy Act. As required by law we do AML and KYC checks on all customers on-boarding and trading on our platform. We apply all US sanctions and prevent transactions as required by law. We have an outstanding record of cooperation with US authorities…”
In the Coinbase blog post from Tuesday titled, “Our approach to preventing illicit activity in crypto,” the cryptocurrency platform explains that it has over 400 “compliance, legal, and investigative staff throughout the company who work alongside US government national security and law enforcement agencies, including senior personnel who served in those agencies.”
competing analysis
Blockchain analytics firms appear to be taking issue with one of their own – namely, Elliptic – whose data was referenced by The Wall Street Journal last week in a key story about how cryptocurrency was used to fund the terrorist organization Hamas.
Yesterday, blockchain analytics firm Chainalysis said, “…we have also seen overstated metrics and flawed analyses of these terrorist groups’ use of cryptocurrency, and feel compelled to address some misconceptions.” Read their POV.
And on crypto publication Decrypt, blockchain analytics firm TRM Labs’ policy executive Ari Redbord says, “Crypto makes up a very, very small part of a much larger fundraising picture when it comes to Hamas.” Read that one.
Speaker McHenry update
“New: Rep. Brian Fitzpatrick (R-PA) tells reporters ‘now’ is the time to empower Speaker Pro-Tem [Patrick McHenry (R, NC)] to pass legislation. FITZPATRICK: ‘I think I think we’re going to empower the Speaker Pro Tem to act as Speaker for a period of time, possibly through the end of the year…'” – Nathaniel Reed, Congressional Correspondent, Scripps News on X at 3:17 p.m. ET yesterday.
hear ye, hear ye
The House Financial Services (HFS) Committee continues to crank out new hearings in spite of the fact HFS Chair Patrick McHenry (R, NC) may add significant new responsibilities as House Speaker.
Yesterday, two hearings were added to the schedule. Both connect to digital assets:
“Digital Assets, Financial Technology and Inclusion Subcommittee Hearing Entitled: ‘Modernizing Financial Services Through Innovation and Competition’” – Wednesday, October 25, 10 am ET
“National Security, Illicit Finance, and International Financial Institutions Subcommittee Hearing Entitled: ‘How America and Its Allies Can Stop Hamas, Hezbollah, and Iran from Evading Sanctions and Financing Terror’” – Wednesday, October 25, 2023, 2:00 pm ET
See all five HFS hearings scheduled for next Tuesday and Wednesday here.
Democrat joins FIT bill
Rep. Henry Cuellar (D, TX) has signed on to co-sponsor the digital asset market structure bill [H.R 4763] passed out of the House Financial Services and Agriculture Committees in late July.
Cuellar isn’t on either of the two Committees where the bill originated -rather, he’s on House Appropriations and the Steering Policy Committees. His addition to the bill may be an indicator of broadening support among Democrats in Congress.
See “Financial Innovation and Technology for the 21st Century Act” [H.R 4763] on Congress.gov.
FDIC preparedness
A new Federal Deposit Insurance Corporation (FDIC) report was published yesterday offering “Strategies Related to Crypto-Asset Risks” for itself. As a result of the report, the FDIC’s Office of Inspector General (OIG) claims the agency is not quite ready for the crypto-asset future.
“We determined that the FDIC has started to develop and implement strategies that address the risks posed by crypto assets. However, the Agency has not assessed the significance and potential impact of the risks. Specifically, the FDIC has not yet completed a risk assessment to determine whether the Agency can sufficiently address crypto-asset related risks through actions such as issuing guidance to supervised institutions.”
Read the release. And, get the report (PDF).
EU CBDC
The European Central Bank is pushing ahead on its deliberate plans for an EU central bank digital currency (CBDC), a.k.a. Digital Euro. Proponents hope it will spur innovation, but the Wall Street Journal reported yesterday on one of the drawbacks: “A key obstacle is lack of demand, since Europeans can already make digital payments via the region’s existing bank-based payments system. The use case is also hurt by likely limits on how much digital currency each citizen could hold, which could be around €3,000 per person.” Read the WSJ.
The European Central Bank said in a press release, also yesterday, “The next phase of the digital euro project – the preparation phase – will start on 1 November 2023 and will initially last two years. It will involve finalising the digital euro rulebook and selecting providers that could develop a digital euro platform and infrastructure…” And more –read it.
still more tips
Opinion: Why Congress Will Be the Dollar’s Downfall – CoinDesk
New Letter: “Senator Warren Questions Microsoft over ‘Deeply Disturbing’ Reports Company Owes IRS $28.9 Billion Due to Egregious Tax Evasion Scheme” (PDF) – Senator Elizabeth Warren
Keynote of Commissioner Christy Goldsmith Romero on The Power of Representation and Financial Inclusion in the American Dream – CFTC.gov
The secret life of Jimmy Zhong, who stole – and lost – more than $3 billion in Bitcoin – CNBC