US Treasury will outline fears about use of crypto in illicit finance at upcoming hearing

A U.S. Treasury official will outline the agency's concerns about crypto in illicit finance to House lawmakers and ask for more authority to go after bad actors, according to prepared testimony ahead of a congressional hearing set for Wednesday.

"Treasury is deeply concerned about the use of virtual assets for all illicit financial activity," Brian Nelson, Treasury's Under Secretary for Terrorism and Financial Intelligence, said in prepared remarks ahead of the House Financial Services Committee hearing focused on terrorism and illicit finance. 

Lawmakers in Washington have increasingly turned their attention to illicit finance in crypto. Sen. Elizabeth Warren, D-Mass., has been pushing for her anti-money laundering bill, while Senate Banking Committee Chair Sherrod Brown, D-Ohio, has said he is in talks  about a bill that would target the use of digital assets for money laundering, according to Politico. 

Treasury has been working for the past decade on a framework to combat the financing of terrorism that "mitigates illicit finance risks while promoting responsible innovation," Nelson said in his prepared testimony. 

Treasury does have tools to address some issues, including authorities to hold firms accountable that don't comply with the Bank Secrecy Act.

"However, to root out illicit finance by players in virtual asset markets and forums, we need additional tools and resources," Nelson said. "That is why we are eager to work with Congress to adopt common-sense reforms that update our tools and authorities to match the evolving challenges we face today."

Late last year, the Treasury Department sent recommendations to lawmakers to amplify its authorities, including one that calls for new sanctions tools, to go after bad actors in crypto. Treasury also had said that stablecoins need more oversight, though they were not mentioned in Nelson's testimony.  

A focus on Hamas 

Nelson will also tell lawmakers about Treasury's efforts to block Hamas from moving or raising funds to support terrorism and said the agency is looking out for new methods the group may use. 

"While we continue to assess that terrorists’ use of digital assets remains a small fraction of more established mechanisms to move money, we recognize that terrorist groups have and may continue to turn to digital assets to raise, transfer, and store their illicit proceeds," Nelson said.  

Nelson said Treasury will continue to target financing tied to Hamas in the future.

Nelson's remarks comes a week after Treasury released its 2024 National Risk Assessments on Money Laundering, Terrorist Financing, and Proliferation Financing, which highlighted illicit finance threats and risks in the U.S., including crypto. The reports noted that drug laundering, for example, is mostly cash-based, though the agency said bad actors are increasingly turning toward virtual assets. 

The House Financial Services Committee's digital assets focused panel will also host a hearing on Thursday focused on crypto and illicit activity.