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The US Treasury is seeking expansion of its powers to stop any kind of illicit crypto funding as well as monitoring the crypto exchanges.
The US Treasury Department is looking to tighten its grip on the functioning of crypto exchanges in the country. As per the latest Bloomberg report, the Treasury Department has sought more sanctions against the foreign providers of crypto services. It seeks this as part of protecting the national security.
In written testimony before the Senate hearing on Tuesday, April 9, Treasury Deputy Secretary Adewale O. Adeyemo said:
“Our problem is that actors are increasingly finding ways to hide their identities and move resources using virtual currency.”
He further stated that malicious players like terrorists always “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”.
The US Treasury further pointed out that Iran’s Quds Force has been funding the militant groups of Hamas as well as the Palestinian Islamic Jihad in Gaza, in cryptocurrencies. The Treasury has already initiated actions against these networks as well as those facilitating smaller donations to Hamas.
Adeyemo also stated that Russia and North Korea are also the state actors that have been increasingly using crypto for fund transfers. These two countries have been increasingly making use of stablecoins, thereby trying to circumvent the US sanctions.
Broadening US Treasury’s Sanctions Power on Crypto Exchanges
Last year in December 2023, bipartisan US senators introduced a bill for broadening the Treasury’s sanctions powers and including more terrorist groups such as Hamas. Adeyemo stated that the Treasury had sent proposals with the hope of bolstering the counter-terrorist financing authorities.
In his testimony, Adeyemo outlined three key reforms proposed, which encompassed the introduction of a secondary sanctions tool, the modernization and closure of gaps in existing authorities, and the mitigation of jurisdictional risks posed by offshore crypto platforms.
As of now, the US Treasury holds the power to prohibit US accounts along with transaction processing for foreign institutions with suspicious activities. “But, unlike banks, foreign cryptocurrency exchanges and some money services businesses do not have or depend on correspondent accounts for all of their transactions,” Adeyemo said.
He added that having a secondary sanctions toll would enhance the Treasury’s targeting capabilities. It would also enhance the technological changes required to trace illicit crypto funding. Besides, the Treasury is also seeking an expansion of its reach to cover crypto exchanges and other crypto firms. “We fear that without Congressional action to provide us with the necessary tools, the use of virtual assets by these actors will only grow,” Adeyemo added.
