Experts Inform Congress Crypto Links to Terrorism ‘Overstated’, Regulation Necessary

Experts have lamented the overstated links to terrorism instead crediting the blockchain for entrenching critical transparency. The criticism of overstated ties to funding terrorism featured during the Crypto Crime in Context session. 

Arkanas Representative French Hill lashed out on Capitol Hill during the Thursday February 15 session. The US Representative questioned fellow lawmakers for making reactionary claims that have proven as overly exaggerated when they blamed crypto for facilitating international terrorism funding. 

Lawmakers Overstated Crypto-Links to Terrorism

The criticism for the overstated claims featured in the second session of the House Financial Services Committee where the lawmakers elicited testimony from the financial industry experts. The experts downplayed the overstated claims on anti-money laundering. 

Hill hailed the hearings and confidential briefings held by the committee from the participants drawn from the intelligence community, law enforcement and blockchain experts. The Arkansas Representative hailed the detailed understanding on the scope and scale of crypto’s input in facilitating terror finance. 

Hill indicated that the reactionary arguments were proving greatly exaggerated particularly involving Gaza and Hamas. The lawmaker urged fellow colleagues to prioritize the identification and closure of such gaps that attract bad actors and terrorists. 

Hill reiterated that extinguishing the vulnerabilities would need proper oversight to the crypto ecosystem possible via the underlying technology. 

Hill commended the transparency realized by the public blockchain that has proven reliable in assisting the law enforcement with essential data relating to illicit actors and networks. 

Caroline Hill who heads the Global Policy and Regulatory compliance at USD Coin (USDC) stablecoin issuer Circle informed the lawmakers that terrorist entities leverage stablecoins in soliciting donations. 

Hill expressed uncertainty in understanding how the illicit actors embrace offshore stablecoins. He projected that the preference arises from the public declaration that they operate above the common anti-money laundering requirements and counter-terrorism financing standards.

Hill encouraged the US dollar-pegged stablecoin to deploy similar regulatory obligations outlined by the OFAC and Financial Crimes Enforcement Network (FinCEN). 

Concentration of Illicit Actors Challenging to Enforce Compliance

The primary challenge confronting the federal regulators is the increased concentration of illicit actors. The concentration extends beyond the US borders. 

The head of financial crimes within the crypto exchange Coinbase Grant Rabenn lamented the concentration of offshore platforms where sanctions evasion, criminal activity and terrorist financing. 

Rabenn indicated that the existing legal tools could prove applicable to policing the offshore actors. The executive indicated that Coinbase identified over 8 million wallets it considers engaged in fraud. Nonetheless, OFAC has only sanctioned 560 addresses. 

Rabenn indicated that extrapolating the ground truth on OFAC-sanctioned addresses yields an opportunity to halt the funds flowing to the bad actors. Besides, the onshore regulated exchanges are involved in investing in compliance systems. 

Rabenn indicated that entities often assume jurisdictional whack a mole in an attempt to circumvent the strict anti-money laundering rules. They anticipate that the regulators will not mind. 

Rabenn warns against lawmakers supporting overregulation of the crypto industry. The executive echoed Hill’s argument that transparency of the blockchains yield visibility into the crypto-based transactions than the traditional finance (TradFi). 

Avoid Poorly Conceived Public Policy

Rabenn is confident that crypto compliance is likely becoming strict. It yields a new compliance dimension for the public ledgers that facilitate visibility into what users can do on the platform. 

The blockchain beauty draws praise from ex-director of FinCEN – Michael Mosier who is now counsel of crypto firm Espresso Systems. He indicated that Coinbase’s Rabenn illustrated the cases prosecuted at the Department of Justice (DOJ) at both OFAC and FinCEN. 

The capability to realize the transparent ledger necessary to operate within the digital space that features structured data. Such eases the capability to build the cases exponentially. 

Mosier illustrated that regulatory agencies, such as FinCEN require more funding from the Congress to tackle the illicit crypto activity. 

Maxine Waters from California blamed the Republicans for scuttling law enforcement efforts. The ranking member indicated that the MAGA Republicans cut funds to the agencies contrary to the efforts to bolster the jurisdiction of the enforcement agencies. Such places the national security at risk of breach.

Representative Ted Budd from North Carolina warns that judging the technologies by the worst uses would prompt the formulation of poorly conceived public policy.