Why GOP senators say Biden is ‘scapegoating’ crypto on illicit finance

Republican lawmakers said on Tuesday that the Biden administration is making the crypto industry a “scapegoat” for illicit financing.

Since the October 7 attacks by militant group Hamas on Israel, anxieties have sharpened among lawmakers on both sides of the aisle that cryptocurrencies are being used to fund America’s enemies.

The crypto industry and its — often Republican — supporters in Congress counter that any financing militant groups or rogue nations get in crypto is dwarfed by the amount of funding they get from more traditional avenues, like cash.

That argument was repeated on Tuesday during a Senate Banking Committee hearing, which was held to discuss whether Congress should pass laws to widen the powers of the Treasury Department to target crypto industry players.

Republican lawmakers argued that the Biden administration is allowing Iran to sell its oil to China and to access billions of dollars via sanctions waivers — far more of an issue than crypto financing.

“Having a conversation simply and exclusively about digital assets misses the elephant in the room that every single time we make it easier for the Iranian regime to receive resources from the United States in cash — pallets of cash — or through electricity waivers … we put more and more of our allies in harm’s way,” Senator Tim Scott of South Carolina, the committee’s top Republican, said.

For Congress to be talking about digital asset financing rather than about the far larger problem of illicit financing more generally “makes it into a scapegoat,” Scott added.

Scott was reacting to testimony from Treasury deputy secretary Wally Adeyemo, who asked the committee for more authority and sanctions tools to target crypto firms, both in the US and abroad.

Adeyemo conceded that militant groups like Hamas and Hezbollah still prefer traditional means of financing. However, as the Treasury’s sanctions are cutting off these groups from those sources of funding, the organisations are moving to alternatives — including crypto, he said.

The US “has a strong interest in ensuring that we have the necessary tools and authorities available and ready to mitigate the risks in this quickly evolving ecosystem, including the dollar-based digital assets in particular, " Adeyemo said.

“We fear that without congressional action to provide us with necessary tools, the use of virtual assets by these actors will only grow.”

He pointed out that lawmakers in the committee are already concerned about illicit crypto financing.

“There is clear overlap between the proposals that we have made and the bipartisan bills coming out of this committee,” Adeyemo said.

Senate Banking Committee members include Massachusetts Democrat Elizabeth Warren, whom many in the crypto industry consider their archnemesis. Warren is the author of a bipartisan bill to combat money laundering via crypto.

The committee also boasts Republican Thom Tillis of North Carolina and Democrat Mark Warner of Virginia, both of whom are backing bills aiming to stop illicit money transfers via crypto.

Reach out to the author at joanna@dlnews.com.