Terrorists Are Turning To Crypto To Circumvent Sanctions: Treasury Department

• The Treasury Department is concerned over the increasing use of crypto by terrorists.
• The Department requests additional tools to protect Americans from bad actors.
• These Syria-based terrorist groups used Bitcoin for money laundering in the past.

The U.S. Department of Treasury has expressed concern over the increasing use of cryptocurrencies by terrorists and malign groups to circumvent sanctions. The Department’s Secretary, Wally Adeyemo, stated this on April 9 while testifying before the Committee on Banking, Housing, and Urban Affairs and the U.S. Senate.

According to Adeyemo, the Treasury Department needs additional tools to protect Americans, considering the increasing trend of bad actors adopting cryptocurrencies for illegal transactions. He cited certain instances when al-Qaeda and other affiliated terrorist groups, based out of Syria, operated a Bitcoin money laundering network using social media platforms to solicit cryptocurrency donations.

Adeyemo explained that the terrorist group received virtual currency from online donors and laundered the proceeds through various online gift card exchanges. He also highlighted the Islamic Revolutionary Guard Corps-Quds Force (IRGC-QF) transferring cryptocurrency to Hamas and the Palestinian Islamic Jihad (PIJ) in Gaza. He noted it as another instance of bad actors deploying cryptocurrency to avoid scrutiny.

Furthermore, Adeyemo noted that bad actors can hide their identities by using cryptocurrencies for transactions. Hence, they try to escape the department’s scrutiny, which has made it harder for them to use traditional financial systems for transactions. 

Despite acknowledging the grounds covered by the Treasury Department in uprooting illicit finance in the digital asset ecosystem, Adeyemo highlighted the need to build an oversight and enforcement regime. He believes it would be capable of tackling the developing trend as more terrorists, transnational criminals, and rogue states turn to digital assets.

The Deputy Secretary used the opportunity to call on the community to take action on the Treasury Department’s proposal. The proposal focused broadly on three reforms, including introducing a secondary sanctions tool targeting foreign digital asset providers that facilitate illicit finance.

The Department also proposed to modernize and close gaps in existing authorities. They plan to achieve this by expanding their reach to explicitly cover the key players and core activities around digital assets. They also plan to address jurisdictional risk from offshore cryptocurrency platforms, which they consider a significant challenge.