In a recent testimony before the Senate Banking Committee, United States Deputy Treasury Secretary Adewale Adeyemo reiterated the need for increased enforcement powers to combat illicit finance, terrorism, and sanctions evasion facilitated by cryptocurrencies. Adeyemo outlined three proposed reforms aimed at bolstering U.S. enforcement efforts against international bad actors utilizing crypto.
Introduction of Secondary Sanctions: Adeyemo emphasized the necessity of implementing secondary sanctions targeting “foreign digital asset providers” engaged in illicit finance. While existing U.S. sanctions restrict institutions from utilizing U.S. correspondent accounts, crypto exchanges and money services often operate without relying on these accounts.
Adeyemo stressed the need for a new secondary sanctions tool to ensure that U.S. authorities can reach extraterritorially when digital asset entities harm national security while leveraging the U.S. financial system.
Expansion of Existing Authorities: The Treasury Department seeks to expand the powers of existing authorities to encompass the digital asset ecosystem, enhancing its ability to address illicit activities within this domain.
Addressing Jurisdictional Risk: Adeyemo highlighted the challenge posed by offshore cryptocurrency platforms and emphasized the importance of addressing jurisdictional risks associated with these entities.
Adeyemo noted that the Treasury Department’s proposals align with bills introduced by the Senate Banking Committee, such as the Digital Asset Anti-Money Laundering Act of 2022. Committee members Elizabeth Warren and Sherrod Brown, who authored the bill, have been vocal critics of cryptocurrencies.
Adeyemo cited the use of crypto by terrorist groups, North Korea, and in the fentanyl trade as evidence necessitating enhanced enforcement powers. While acknowledging that terrorists primarily utilize traditional financial products and services, Adeyemo warned of the potential growth in the use of virtual assets by such actors without congressional action.
Chair Sherrod Brown expressed support for the Treasury Department’s enforcement goals, underscoring the importance of combatting threats to U.S. security. Ranking member Tim Scott praised the Treasury’s efforts but emphasized the need to address foreign policy issues posing risks to U.S. security.
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