Nikolas Sargeant
The Deputy Secretary of the Treasury, Wally Adeyemo, has urged Congress to pass new laws that would expand the Treasury's control over cryptocurrencies. Adeyemo believes additional authorities are necessary to oversee crypto activities effectively beyond the United States.
A Decade Of Shaping The Future Through Decentralization
The U.S. Department of the Treasury seeks new powers to enforce and impose sanctions on the crypto sector. These powers would allow the government to go beyond American borders and get involved in transactions that do not involve its citizens. This would be an unprecedented level of authority for the government.
Wally Adeyemo, Deputy Secretary of the Treasury, has approached senior members of Congress with a written proposal. He refers to it as "a set of common-sense recommendations to expand our authorities and resources to combat illicit actors in the digital asset space." In excerpts from his upcoming speech in Washington, Adeyemo shares these details.
The Treasury document states that the modes of raising and moving money constantly evolve. However, our authorities last updated decades ago. Terrorist groups, such as Hamas, are utilizing new virtual methods to move, store, and hide their funding streams. These methods frequently involve using evasive cryptocurrency networks and services, like mixers.
The proposal suggests that Congress should give the Treasury a new tool against exchanges that support terrorism. This tool would resemble the government's powers over correspondent banking accounts. It would also address the technological changes that have made traditional tools less effective against cryptocurrencies.
The Treasury Tightens Grip On Exchanges And Wallets
Adeyemo stated that if a firm continues to do business with the sanctioned entity, it will not only be disconnected from the U.S. financial system but also expose itself to the risk of being disconnected from it.
Lawmakers propose strengthening the powers of the department under the Bank Secrecy Act (BSA). The proposal suggests targeting cryptocurrency entities and services that support terrorist funding. It calls for a new category of financial institutions, including cryptocurrency exchanges, Virtual Asset Service Providers (VASPs), virtual asset wallet providers, certain blockchain validator nodes, and decentralized finance services. These institutions would be required to meet specific anti-money laundering requirements.
The crypto industry believes that wallet providers and decentralized finance (DeFi) entities may need help to meet the requirements imposed by certain laws. This could cause these entities to be shut down.
According to Austin Campbell, founder of Zero Knowledge Consulting, the proposal has reasonable points and significant concerns. It seeks to expand powers to a degree not seen since the Patriot Act, disregarding important technical aspects of modern communication. Additionally, this overreach could lead to significant geopolitical conflicts.
USDT And Stablecoins
The government wants to control Tether and other stablecoins, like USDT. They are considering giving OFAC the authority to have jurisdiction over transactions involving stablecoins pegged to the USD or other dollar-denominated transactions. This would extend their reach to transactions that have no U.S. involvement.
Adeyemo reiterated his belief that non-U.S. stablecoin issuers should not be allowed to use the U.S. dollar without measures to prevent terrorist misuse. The Treasury campaign references reports on crypto funding by Hamas. Still, it fails to acknowledge that these reports were later discredited by an analysis firm, leaving the extent of Hamas' involvement uncertain.
The Treasury Department recently reached a $4.3 billion settlement with Binance, resulting in the Treasury's largest-ever corporate penalty. This settlement included fines and mandated monitoring of Binance's ongoing behavior by U.S. government watchdogs. Furthermore, the department announced its recent action against Sinbad, a crypto-mixing service. The Treasury is focused on staying abreast of innovative approaches to illicit finance by terrorists and criminals and views these actions as necessary to combat such activities.
