During a recent Senate hearing, Senator Tim Scott criticized the current US administration for making digital assets the scapegoat in efforts to combat terrorism financing. He raised concerns about the Treasury’s exclusive focus on cryptocurrencies, arguing that more traditional sources of funding, particularly those benefiting Iran, are being ignored. Scott pointed out Iran’s $35 billion in oil exports and an additional $16 billion in US hostage relief and electricity waivers as significant sources of terrorism funding that are being overlooked.
In response to Scott’s critique, Deputy Treasury Secretary Adewale Adeyemo defended the focus on digital assets, stating that the Treasury’s lack of authority over cryptocurrencies makes it challenging to restrict crypto transactions effectively. He highlighted the unique challenges posed by crypto, such as Russia’s stablecoin use to avoid sanctions and North Korea’s reliance on mixers to obscure financial transactions. Adeyemo outlined the Treasury’s request for additional powers over crypto, including introducing secondary sanctions against foreign crypto providers and tightening existing regulations.
Other senators, including Committee Chairman Sherrod Brown and Senator Bob Menendez, also expressed support for tighter regulations in the digital assets sector. Brown emphasized the importance of crypto platforms adhering to the same regulatory standards as traditional financial institutions to combat terrorist financing. Menendez raised concerns about the ease of converting oil proceeds to crypto, to which Adeyemo reiterated the necessity for more comprehensive authority over the sector.
The Treasury’s formal request for additional authority over crypto, dating back to November, focuses on introducing a secondary sanctions tool aimed at foreign crypto providers, tightening existing authority over crypto, and addressing jurisdictional risks from international crypto platforms. The call for enhanced oversight of digital assets is seen as crucial by policymakers to prevent abuse and illicit activities in the sector.
The focus on digital assets in US efforts to combat terrorism financing has sparked a debate among policymakers. While some, like Senator Tim Scott, argue that more traditional sources of funding are being overlooked, others, including Deputy Treasury Secretary Adewale Adeyemo, defend the focus on cryptocurrencies due to the unique challenges they pose. The call for enhanced oversight and tighter regulations in the digital assets sector is gaining support from various senators, highlighting the need for comprehensive authority to address risks and prevent abuse in the sector.