The U.S. Senate Banking Committee, chaired by Sen. Sherrod Brown, aims to rigorously tackle the use of cryptocurrencies in funding terrorism. During a hearing last Thursday on illicit finance, the Ohio Democrat announced that his committee will scrutinize various methods of terrorist financing, including cryptocurrency. Significantly, this move comes as the U.S. seeks to support Israel against “Iranian-backed terrorists like Hamas.”
Brown emphasized the necessity of severing the financial lifelines for terrorists. The Senate Banking Committee oversees U.S. financial watchdogs, thus placing Brown in a pivotal role when it comes to formulating crypto policy. He contends that additional measures must be enacted to disrupt the flow of funds to terrorist organizations.
Analytical firms question accuracy of previous reports
However, blockchain analytics firms Elliptic and Chainalysis have called into question recent reports on the involvement of cryptocurrency in the Israel-Hamas conflict. Both firms assert that the data has been largely misinterpreted and exaggerated. The Wall Street Journal, a notable news outlet, had previously linked Hamas to tens of millions in cryptocurrency donations. However, Elliptic has countered this claim, stating that the amounts raised by Hamas via digital assets remain relatively minuscule compared to other funding avenues.
Besides, the same blockchain firms have urged The Wall Street Journal to amend their initial reporting, drawing scrutiny from cryptocurrency advocates. The analytical firms insist that the narrative surrounding crypto and terrorism requires a more nuanced understanding and fact-based reporting.
Legislation in motion to close loopholes
Moreover, other U.S. lawmakers are joining Brown in his legislative crusade against the illicit use of cryptocurrencies. More than a hundred of them, including Senate Banking Committee member Sen. Elizabeth Warren, recently petitioned federal agencies to clamp down on crypto’s availability to terrorist networks. These legislative efforts are not solely partisan; indeed, they are part of a broader bipartisan initiative to tighten illicit finance rules around digital assets.
Additionally, Brown criticized crypto platforms for their lack of “common-sense safeguards,” which he argues are present in traditional banking systems to prevent the movement of illicit funds. He believes the administration needs to go beyond the steps taken last week by the U.S. Treasury to impose sanctions on individuals and entities allegedly supporting Hamas terrorist operations.
In line with this, Brown emphasized that multi-pronged efforts, which include sanctioning and seizing assets, are crucial. Hence, a multilateral approach is imperative for dealing with the complexities of tracking and halting crypto transactions related to terrorism. According to Brown, tackling this issue is akin to playing a game of whack-a-mole, as law enforcement may disrupt one transaction while criminals simply shift to another platform.
The Senate Banking Committee, therefore, aims to work in a bipartisan manner to ensure that “terrorists and bad actors” cannot exploit the loopholes in the existing crypto regulations. Although Sen. Brown has been a vocal critic of the crypto industry, especially following the collapse of FTX, his committee will have to give due consideration to any comprehensive digital assets legislation that comes its way.