United States-based crypto advocacy organizations are calling out Senator Elizabeth Warren and other lawmakers for some of the claims made regarding connections between the terrorist group Hamas and financing through cryptocurrency.

On Oct. 17, Sen. Warren and more than 100 lawmakers signed a letter calling for action to “meaningfully curtail illicit crypto activity” used for funding Hamas and the Palestinian Islamic Jihad in the wake of an attack on Israelis. The Massachusetts Senator, a prominent crypto opponent in the U.S. Congress, also penned a Wall Street Journal op-ed with Sen. Roger Marshall on Oct. 18 with claims that “crypto-financed terrorism” endangered U.S. citizens by funding such groups as well as the production of illicit drugs.

Yaya Fanusie, director of anti-money laundering at the Crypto Council for Innovation, said Warren’s proposed solution to some of these issues would not address the problem occurring outside U.S. jurisdictions. Sen. Warren said her bill, the Digital Asset Anti-Money Laundering Act, was aimed at ensuring "that the same rules to protect traditional payment systems from abuse are extended to crypto”.

“They are proposing KYC [Know Your Customer] rules akin to suggesting that copy machine manufacturers would need to KYC anyone using their copiers,” said Fanusie. “[Warren and Marshall] unfortunately fail to understand that the underlying blockchain">blockchain technology actually makes transactions public, providing investigators a digital paper trail to identify terrorist operatives and their financial contributors.”

The Blockchain Association (BA) responded with similar claims in an Oct. 18 X (formerly Twitter) thread, pointing to reports from April that groups within Hamas stopped using Bitcoin ( BTC ) for supporting terrorist activities, as authorities could more easily track funds. According to the advocacy group, “only a small fraction of Hamas’s funding has come from crypto” and it was unclear how terrorists benefitted from those funds in the recent attacks on Israel.

“These proposals [Crypto-Asset National Security Enhancement and Enforcement and Digital Asset Anti-Money Laundering Act] will only punish law-abiding U.S.-based users and push all industry actors to other jurisdictions outside the reach of U.S. law enforcement,” said the BA.

1/ Any amount of funding that goes to support terrorist activity – in any form – is too much.

We share many of Sen. Warren’s questions – and we think further examination will reveal the limited and dwindling role that crypto played. https://t.co/jWwHNBe9oH

— Blockchain Association (@BlockchainAssn) October 18, 2023

Sen. Warren’s op-ed as well as sanctions imposed by the U.S. Treasury’s Office of Foreign Assets Control followed an Oct. 7 attack by Hamas that resulted in the deaths of many Israelis. Israel has since declared war on the terrorist organization and began bombarding Gaza, creating a humanitarian crisis for hundreds of thousands of people caught in the crosshairs.

Related: Binance freezes Hamas-linked accounts after Israeli request

Certain U.S. lawmakers, including Sen. Warren, have sometimes pointed fingers at crypto amid an international crisis, such as digital assets being used to evade sanctions on Russia in the wake of the country’s attack on Ukraine. Prior to Hamas’s attack on Israel, Warren was particularly outspoken in cracking down on crypto’s alleged role in production of the drug fentanyl and other illicit purposes.

“Rather than politicizing this issue, [Sens. Warren and Marshall] should look to better support the talented and deeply knowledgeable people across multiple agencies who could use extra resources to help track down bad actors,” said Fanusie. “The U.S. should take proactive steps to make sure that law enforcement and national security officials have the best access to tools, training and expertise, and information that can be used to combat illicit activity, including around crypto.”

At the time of publication, it was unclear if any of Sen. Warren’s suggested bills would be able to move through Congress amid Republican members of the House of Representatives being unable to unite behind voting in a new Speaker. Since Speaker Kevin McCarthy’s position was declared vacant on Oct. 4, pro-crypto lawmaker and House Financial Services Committee chair Patrick McHenry has been acting as interim Speaker.

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