The United States House Financial Services Subcommittee on Digital Assets, Financial Technology, and Inclusion held a hearing on Nov. 15 titled “Crypto Crime in Context: Breaking Down the Illicit Activity in Digital Assets.” The bipartisan nature of the hearing was emphasized by Chair French Hill who led the committee in receiving an education on the uses of blockchain technology. The meeting commenced with French Hill referencing a Wall Street Journal article from Oct. 10, which was later corrected on Oct. 27 to accurately reflect data produced by blockchain analytics firm Elliptic. Hill emphasized that just as the phone and the internet are not to blame for terror financing, crypto should not be disregarded based on preconceived notions.
The panel of witnesses at the hearing included representatives from Consensys and Chainanalysis, as well as forensic experts and a senior counsel from law firm Hogan Lovells. These individuals spoke about the necessity of international collaboration and public-private partnerships to prevent the misuse of digital assets. Additionally, they highlighted the need for well-crafted legislation and detailed the complexities of blockchain sleuthing.
During the hearing, Representative Brad Sherman asked Alison Jimenez, the president of Dynamic Securities Analytics, for an example of a licit use of a crypto mixer, to which she was unable to provide a satisfactory response. This underscored the challenges in understanding and addressing the potential misuse of cryptocurrencies in illicit activities.
In a parallel effort to address the issue of illicit use of digital assets, a bipartisan group of House members, including Hill, Representative Tom Emmer, Financial Services Committee Chair Patrick McHenry, and Representative Ritchie Torres, along with 53 other members, wrote a letter to President Joe Biden and Treasury Secretary Janet Yellen. The letter, dated Nov. 15, requested information on the fundraising activities of Hamas and Palestinian Islamic Jihad, specifically focusing on the role of cryptocurrency in their efforts to raise funds. The letter highlighted the importance of understanding the traditional funding activities of these organizations in conjunction with their digital asset fundraising campaign.
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The Wall Street Journal was also cited in this letter as a source of information. A second article published by the same authors on Nov. 12 further discussed the use of crypto to funnel money to Hamas. These developments added to the urgency of addressing the potential misuse of digital assets in funding illegal activities.
Additionally, the Blockchain Association released an open letter on Nov. 15 addressed to Hill and other members of the Financial Services Committee. This letter was signed by 40 former members of the U.S. military, intelligence officers, and national security professionals who now have ties to digital assets companies or venture capital. They expressed concerns about the impact of misleading information on legislation related to digital assets on U.S. national security interests, emphasizing the importance of encouraging the growth of a regulated, compliant digital asset industry.
Through these coordinated efforts, the House Financial Services Subcommittee aims to gain a comprehensive understanding of the implications of illicit activity in digital assets. With the involvement of various stakeholders and experts, the goal is to develop strategies, legislation, and regulations that effectively combat the misuse of digital assets while fostering the growth of a compliant and secure digital asset industry in the United States.
