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US Treasury Deputy Secretary Urges Congress for Tools to Tackle Crypto-Related Illicit Finance

During a session with the Senate Banking, Housing, and Urban Affairs Committee, Wally Adeyemo, Deputy Secretary of the US Treasury, emphasized the urgency for Congress to equip regulatory measures against cryptocurrency-linked illicit finance. Adeyemo highlighted the escalating use of virtual currencies and digital assets by terrorist organizations and state actors like Russia and North Korea to obscure identities and facilitate resource movement.

Despite some strides in identifying illicit financial activities, Adeyemo stressed the imperative to broaden enforcement initiatives to thwart such endeavors by “malign actors.”

“While we recognize that terrorists still predominantly utilize traditional financial services, we are apprehensive that the employment of virtual assets by these entities will only burgeon without legislative action to furnish us with essential tools,” Adeyemo remarked.

Adeyemo Asks for Crypto Regulations

Adeyemo underscored the increasing reliance of these groups on virtual assets and cautioned that without intervention from Congress, their integration into illicit activities would persist and proliferate.

He referenced instances such as North Korea’s utilization of sophisticated cyber heists for the acquisition and laundering of unlawful revenue, along with Russia’s utilization of alternative payment channels like the stablecoin tether to circumvent sanctions and fund its conflicts.

In response to these pressing challenges, Adeyemo urged Congress to enact legislation bolstering measures aimed at foreign digital asset providers facilitating illicit finance, advocating for the implementation of secondary sanctions as part of these efforts.

Moreover, Adeyemo emphasized the critical need to close regulatory loopholes and expand authorities to encompass entities such as virtual asset wallet providers and cryptocurrency exchanges that have emerged since the enactment of current laws. He also underscored the imperative of mitigating jurisdictional risks posed by offshore cryptocurrency platforms to safeguard US national security.

Prominent cryptocurrency firms, including Coinbase Global and Circle Internet Financial, urged Senate Majority Leader Chuck Schumer and House Speaker Mitch McConnell to enact regulations for stablecoins and enhance the overall digital asset market structure. They highlighted the dangers of regulatory arbitrage resulting from the lack of regulatory clarity and advocated for extending anti-money laundering and sanctions regulations to encompass foreign stablecoin issuers pegged to the US dollar.

Adeyemo affirmed that the Treasury had previously proposed reforms to the committee and expressed the department’s readiness to collaborate with lawmakers in addressing these concerns.

UN Highlights Tether Role in Illicit Financing

A recent United Nations report has brought attention to Tron’s prevalence in cyber fraud and money laundering activities across Southeast Asia. The report highlights the rapid proliferation of sophisticated, high-speed money laundering teams specializing in the use of Tether for underground transactions.

It notes that online gambling platforms, particularly those operating outside legal boundaries, have become favored channels for cryptocurrency-based money launderers, with USDT being a preferred option.

Tether has contested these allegations, stressing its cooperation with law enforcement agencies and the traceability of its token. Responding to the UN report, Tether stated that its collaboration with global law enforcement bodies, including the Department of Justice (DOJ), the Federal Bureau of Investigation (FBI), and the United States Secret Service (USSS), has endowed it with unparalleled monitoring capabilities, surpassing those of traditional banking systems.

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Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

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