Campaign for Accountability (CfA) sent a letter to U.S. Senators Sherrod Brown and Elizabeth Warren addressing Circle Chief Strategy Officer Dante Disparte’s response to CfA’s previous concerns about the company’s operations.
CfA, a nonpartisan, nonprofit watchdog organization, initially raised concerns over Circle’s USDC stablecoin, its integration with the Asian blockchain network TRON, and TRON’s founder, Justin Sun.
Allegations of entanglement in terror financing
The Campaign for Accountability (CfA) sent a letter raising concerns about the potential connections between the company’s USDC stablecoin and the TRON blockchain network. The letter specifically addressed the involvement of USDC in an incident involving the Israeli government’s seizure of TRON wallets. These wallets were linked to the Palestinian Islamic Jihad (PIJ), which is recognized as a terrorist organization. CfA’s letter pointed out the risks associated with the unregulated integration of Circle with TRON, especially highlighting concerns over the “Cross-Chain Transfer Protocol.”
CfA’s concern centered on the possibility that the “Cross-Chain Transfer Protocol” could enable a type of money laundering known as “chain-hopping.” The process involves moving assets across different blockchain platforms to obscure the origin and movement of funds. The letter emphasized the need for regulated and transparent practices in the cryptocurrency industry, particularly when dealing with platforms and protocols that could potentially be misused for illicit activities like money laundering.
In response, Dante Disparte did not deny the involvement of USDC in the Israeli agency’s action but downplayed its significance due to the small percentage of USDC seized. However, CfA argues that the response inadvertently confirms that the integration with TRON can indeed facilitate illicit activities using USDC. Disparte did not address Circle’s “Cross-Chain Transfer Protocol” or comment on CfA’s assertion that it could further illicit activity.
Concerns over Circle’s relationship with Justin Sun
CfA also raised concerns over the company’s relationship with Justin Sun. Disparte’s response indicated that Circle no longer “banks” Justin Sun but disclosed that Sun and/or his companies had banking relationships with Circle until seven months ago. The nature of the banking relationship is unclear, especially since Circle does not possess a banking license.
Michelle Kuppersmith, Executive Director of CfA, emphasized the need for congressional review and oversight of these issues. The organization stresses that the potential for cryptocurrencies to finance terrorist organizations and enemies of the United States is not only a banking issue but also a critical national security matter. The recent developments and Circle’s response have underscored CfA’s call for more stringent oversight in the cryptocurrency sector, particularly concerning entities with possible connections to organizations designated as terrorists.
the concerns raised by Campaign for Accountability (CfA) regarding Circle’s operations and its ties with TRON, particularly the use of USDC in potentially illicit activities, highlight significant issues in the cryptocurrency industry. Circle’s response, which neither fully addresses nor denies these allegations, underscores the complexity of relationships and operations within the crypto world. The situation calls attention to the urgent need for increased regulatory oversight and congressional review, especially considering the implications for national security and the potential use of digital currencies in financing terrorism. The developments in the case reflect the broader challenges facing the cryptocurrency sector as it navigates the balance between innovation and compliance with legal and ethical standards.