December 19, 2023

Warren Demands Answers from Crypto Firms on Abuse of the Revolving Door to Undermine Bipartisan Efforts to Rein in Crypto Terrorist Financing

Crypto Industry is Employing “A Small Army” Former Defense, National Security, and Law Enforcement Officials to Stop Efforts to Rein in Crypto Crime

Text of Letter (PDF)

Washington, D.C. – United States Senator Elizabeth Warren (D-Mass.), a member of the Senate Banking, Housing, and Urban Affairs Committee, sent letters to three crypto giants: the Blockchain Association, Coin Center, and Coinbase, asking each of these organizations about their use of the revolving door to undermine efforts to rein in crypto’s use in terrorist financing. The letters come as a troubling report found that crypto interests are abusing the revolving door and employing a “small army” of former defense, national security, and law enforcement officials to undermine bipartisan efforts in Congress and the Biden administration to address the role of crypto in financing Hamas and other terrorist organizations. 

“New information has revealed that crypto has become ‘an essential part for [Hamas’s] operational activity,’ and the CEO of massive crypto exchange Binance pled guilty to charges that ‘include failure to implement programs to prevent and report suspicious transactions with terrorists… ransomware attackers, money launderers, and other criminals’... In response to these concerns, a number of members of Congress have introduced legislation to address gaps in the anti-money laundering and countering-the-financing-of-terrorism frameworks that bad actors use crypto to exploit. But the response of the crypto industry appears to be focused on delaying and denying new rules that would restrict crypto’s use by terrorists and criminals,” wrote Senator Warren. 

New reporting found that the crypto industry is employing former defense, national security, and law enforcement officials to undermine efforts to address crypto’s use in terrorist financing: “Coinbase, the largest U.S. crypto exchange, announced this month that former Defense Secretary Mark Esper and other national security experts had joined its ‘global advisory council,’ which also includes Bush counterterrorism adviser Frances Townsend”, and “The Blockchain Association … sent to Capitol Hill a letter signed by 40 former military officials, ex-intelligence officers and nat sec [National Security] professionals…. downplayed illicit activity in crypto relative to traditional finance and argued against policies that would drive digital asset players overseas — a frequent industry talking point.” 

The Senator notes that the crypto revolving door has been open even before this current crisis. In May 2023, Coinbase created its Global Advisory Council, “to help navigate the complex and evolving landscape of the crypto industry, and strengthen relationships with strategic stakeholders around the world.”  This council initially included three former members of Congress: Sen. Patrick Toomey, Rep. Tim Ryan, and Rep. Sean Patrick Maloney, who had served on the House Intelligence Committee and has been nominated by President Biden to be the United States Representative to the Organization for Economic Cooperation and Development.  

“This abuse of the revolving door is appalling, revealing that the crypto industry is spending millions  to give itself a veneer of legitimacy while fighting tooth and nail to stonewall common sense rules designed to restrict the use of crypto for terror financing – rules that could cut into crypto company profits… Congress and the public deserve transparency about the extent to which crypto firms are using revolving door practices fighting efforts to close holes in current anti-money laundering and terrorist finance laws,” concluded Senator Warren. 

Given these concerns, Senator Warren is asking each crypto organization to answer a set of questions about its use of the revolving door to employ government officials, and the scope of these employees’ work. 

Senator Warren is an outspoken advocate for regulation and oversight of crypto to rein in unchecked illegal activity and protect consumers and the safety and stability of the financial system, and has been a leader on ethics reform legislation that would close the revolving door and end conflicts of interest in Congress and among high-ranking government officials.:

  • In December 2023, Senator Warren announced an expanded coalition of Senate support for the bipartisan Digital Asset Anti-Money Laundering Act. Senators Raphael Warnock (D-Ga.), Laphonza Butler (D-Calif.), Chris Van Hollen (D-Md.), all members of the Senate Banking, Housing, and Urban Affairs Committee, and Senators John Hickenlooper (D-Colo.) and Ben Ray Luján (D-N.M.) joined the bill as cosponsors. 
  • In December 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren questioned Big Bank CEOs, who agreed on the need to apply anti-money laundering rules to crypto companies to protect national security. 
  • In October 2023, Senators Warren and Marshall and Representative Sean Casten (D-Ill.) led 102 lawmakers in a bipartisan letter to National Security Advisor Jake Sullivan and Brian Nelson, Under Secretary for Terrorism and Financial Intelligence at the Department of the Treasury raising grave concerns about reports that in the months leading up to their brutal October 7th terrorist attack on Israel, Hamas and Palestinian Islamic Jihad raised millions of dollars via crypto, evading U.S. sanctions to fund their operations.
  • In October 2023, at a hearing of the Senate Armed Services Committee, Senator Warren spoke about the need to crack down threats posed by crypto, noting that half of North Korea’s missile program is paid for through crypto crime.
  • In September 2023, Senators Warren, Roger Marshall (R-Kan.), Joe Manchin (D-W.Va.), and Lindsey Graham (R-S.C.) announced an expanded coalition of Senate support for their bipartisan Digital Asset Anti-Money Laundering Act, announcing 11 new cosponsors of their legislation – Senators Peters, Dick Durbin (D-Ill.), Chair of the Senate Judiciary Committee, Smith, King, Shaheen, Bob Casey (D-Pa.), Blumenthal, Bennet, Cortez Masto, Fetterman, and Whitehouse.
  • In July 2023, Senator Warren, along with Senators Marshall, Manchin, and Graham reintroduced the Digital Asset Anti-Money Laundering Act, legislation that would mitigate the risks that digital assets pose to our national security by closing loopholes and bringing the digital asset ecosystem into greater compliance with the anti-money laundering and countering the financing of terrorism (AML/CFT) frameworks governing the greater financial system.
  • In July 2023, at a hearing, Senator Warren warned about the national security risks of rogue states using crypto to evade sanctions and fund their weapons programs, spying, and cyberattacks – calling out North Korea for stealing over $3 billion in crypto over the past 5 years, and using proceeds to fund its illegal nuclear weapons program,
  • In May 2023, a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren called out crypto’s role in fueling the fentanyl crisis and announced she will reintroduce her bipartisan Digital Asset Anti-Money Laundering Act, a bill that would close loopholes in anti-money laundering rules, cutting off drug suppliers and cartels from using crypto to facilitate their illegal business. 
  • In May 2023, at a hearing of the Senate Armed Services Committee, Senator Warren questioned senior intelligence officials about crypto’s threats to national security as the method of choice for countries to evade sanctions and fund weapons programs, support spying, and promote cyber attacks.
  • In February 2023, at a hearing of the Senate Committee on Banking, Housing, and Urban Affairs, Senator Warren raised concerns that key parts of the crypto industry are not subject to the same money laundering laws that cover other financial organizations, allowing financial criminals to use crypto to launder billions. 
  • On December 14, 2022, Senators Warren and Marshall introduced the Digital Asset Anti-Money Laundering Act of 2022, bipartisan legislation that would mitigate the risks that crypto and other digital assets pose to the United States’s national security by closing loopholes in the existing anti-money laundering and countering of the financing of terrorism (AML/CFT) framework and bring the digital asset ecosystem into greater compliance with the rules that govern the rest of the financial system.
  • In September 2022, Senator Warren sent a letter to Treasury Secretary Janet Yellen calling on the Treasury Department and the Financial Stability Oversight Council to build a strong regulatory framework for the crypto market.
  • In March 2022, Senators Warren, Reed, Warner, and Tester introduced the Digital Asset Sanctions Compliance Enhancement Act to ensure that Vladimir Putin and Russian elites don't use digital assets to undermine the international community’s economic sanctions against Russia following its invasion of Ukraine.
  • In March 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren highlighted the various crypto tools that could make it easier for sanctioned individuals to hide their wealth and lessen the impact of Russian sanctions.
  • In March 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren warned that crypto may allow Russia to dodge sanctions and urged stronger regulation of the crypto market to ensure that countries, drug traffickers, cyber criminals, and tax cheats can’t evade economic pain.
  • In March 2022, Senators Warren, Warner, Reed, and Brown sent a letter to Treasury Secretary Janet Yellen, asking about the Treasury Department’s plans to enforce sanctions-compliance guidance for the crypto industry to ensure that economic sanctions remain an effective tool for achieving foreign policy goals.

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