US Treasury Deputy Secretary Wally Adeyemo has urged Congress to provide regulatory tools to combat illicit finance related to cryptocurrencies.
In a hearing before the Senate Banking, Housing and Urban Affairs Committee, Adeyemo expressed concerns that terrorist groups, as well as state actors like Russia and North Korea, are increasingly using virtual currencies and digital assets to hide their identities and move resources.
While acknowledging some success in detecting illicit finance activities, Adeyemo emphasized the need to expand enforcement efforts to prevent such actions by “malign actors.”
“While we continue to assess that terrorists prefer to use traditional financial products and services, we fear that without congressional action to provide us with the necessary tools, the use of virtual assets by these actors will only grow,” he said.
Adeyemo highlighted the expanding use of virtual assets by these groups and warned that without congressional action, their adoption would continue to grow. He cited examples such as North Korea using complex cyber heists to acquire and launder illicit revenue, and Russia resorting to alternative payment mechanisms like the stablecoin tether to evade sanctions and finance its conflicts.
To address these challenges, Adeyemo called on Congress to pass legislation that strengthens tools to target foreign digital asset providers facilitating illicit finance, including the imposition of secondary sanctions. Furthermore, he stressed the importance of closing regulatory gaps and extending authorities to cover entities like virtual asset wallet providers and cryptocurrency exchanges that emerged after current laws were enacted.
Coinbase Global (NASDAQ:COIN) and Circle Internet Financial, prominent cryptocurrency firms, also called upon Senate Majority Leader Chuck Schumer and House Speaker Mitch McConnell to enact regulations for stablecoins and improve the overall digital asset market structure. They highlighted the risks of regulatory arbitrage due to the lack of regulatory clarity and urged the extension of anti-money laundering and sanctions regulations to cover foreign stablecoin issuers referencing the US dollar.
Adeyemo confirmed that the Treasury had previously recommended reforms to the committee and expressed the department’s willingness to work alongside lawmakers to address these issues.
A recent United Nations report highlighted Tether’s (USDT) popularity among cyber fraud and money laundering activities in Southeast Asia. According to the report, authorities have observed a rapid growth in sophisticated, high-speed money laundering teams that specialize in utilizing Tether for underground transactions. Tether has refuted these claims, emphasizing its collaboration with law enforcement and the traceability of its token.
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