This Wednesday (November 15, 2023), the House Subcommittee on Digital Assets and Financial Technology, part of the House Committee on Financial Servies, will hold a hearing on “Breaking Down the Illicit Activity in Digital Assets” – addressing the use of crypto to commit crimes, including the laundering of funds and the financing of terrorism. Recently, there have been multiple reports that Hamas had been using crypto markets to raise money to fund its acts of terrorism.
According to the hearing memo, data indicating widespread abuse is low in comparison to the more traditional route of nefarious activity – the utilization of cash via banks and money transmitters:
“According to the Treasury Department’s 2022 National Money Laundering Risk Assessment, “the use of virtual assets for money laundering remains far below that of fiat currency and more traditional methods.” Nevertheless, bad actors may seek to use digital wallets, mixers, and digital asset trading platforms to transact and obfuscate the movements of digital assets. Importantly, the exchange of illicitly obtained digital assets for fiat removes the ability for law enforcement to trace the transaction that would otherwise be available through blockchain. Treasury has highlighted that the problem is not with the United States but with digital asset platforms that operate outside of the U.S. that have “substantially deficient” anti-money laundering programs. Treasury has emphasized that “uneven and often inadequate regulation and supervision internationally allow virtual asset service providers (VASPs) and illicit cyber actors to engage in regulatory arbitrage and expose the U.S. financial system to risk from jurisdictions where regulatory standards and enforcement are less robust.”
Currently, in the US, digital asset firms are required to adhere to the Bank Secrecy Act (BSA), which requires these firms to adhere to AML or anti-money laundering rules and to report suspicious activities (SARs). Yet, comprehensive regulation of digital asset marketplaces remains elusive.
The list of witnesses testifying should shed some light on the current status of empowering crypto firms as well as regulators in the ongoing battle to weed out criminals. As it stands today, the following individuals will provide testimony this Wednesday:
- Bill Hughes, Senior Counsel & Director of Global Regulatory Matters at ConsenSys and previously Associate Deputy Attorney General at the Department of Justice
- Jane Khodarkovsky, Partner at Arktouros and previously Trial Attorney and Human Trafficking Finance Specialist with the U.S. Department of Justice’s Money Laundering and Asset Recovery Section
- Jonathan Levin, Co-Founder & Chief Strategy Officer, Chainalysis
Chainalysis is a top digital asset research and analysis firm that works with multiple agencies providing clarity regarding crypto transactions so the testimony from Levin, as well as the others, should be of interest.
The hearing is scheduled to commence at 10 AM ET on Wednesday, November 15, and will be live-streamed on the Committee website.