J. Scott Applewhite/AP Photo
Sen. Elizabeth Warren (D-MA) led a congressional letter to officials at the White House and Treasury Department in response to recent reports that Hamas raised millions via cryptocurrency exchanges.
On Tuesday, over 100 members of Congress sent a letter to the White House and Treasury Department requesting information about the administration’s plan to crack down on illicit cryptocurrency networks used for money laundering by terrorist organizations such as Hamas. Led by Sen. Elizabeth Warren (D-MA), the letter is in response to recent reports from The Wall Street Journal and CNN revealing that Hamas built up its war chest by raising millions via cryptocurrency exchanges before its attack on Israel earlier this month. According to the Journal report, Hamas covertly managed to finance its operations by becoming “one of the most sophisticated crypto users in the terror-finance domain.”
“We urge you to swiftly and categorically act to meaningfully curtail illicit crypto activity and protect our national security and that of our allies,” reads the letter.
After making the rounds on both the House and Senate side this week, the bipartisan letter gathered signatures from 27 senators and 75 representatives of both parties. The letter did not receive support from the majority of the “Blockchain Eight,” as they’ve been dubbed by the Prospect, who have advocated for more lenient regulation of crypto markets. The group gained their nickname for partnering on a joint letter in 2022 questioning the Securities and Exchange Commission’s investigation into several crypto exchanges, including the now-bankrupt FTX.
However, two Blockchain Eight members did sign on to the letter, suggesting that solidarity on defending crypto from all regulatory assaults is waning on Capitol Hill, as the use cases for digital currencies become terrifyingly real.
Reps. Ritchie Torres (D-NY) and Tom Emmer (R-MN) did not sign the letter. Both have received fawning coverage from the crypto tech press for their efforts to block regulatory action, and both have condemned the Hamas attacks on Israeli civilians, which have killed nearly 1,400.
Torres in particular has been one of the most aggressive attack dogs against SEC chair Gary Gensler’s recent crackdown on crypto exchanges, which he impugns as a “weaponization” of the agency. Torres interrogated Gensler directly during a recent hearing held by the House Committee on Financial Services, taking issue with Gensler’s designation of crypto as a security, which would trigger significant disclosures and other regulations. One flashpoint of this disagreement has been whether crypto should be regulated by the SEC or the Commodity Futures Trading Commission, which has far less institutional financial expertise and staff equipped to effectively tackle the issue, as well as a leadership that has been friendlier to digital currencies.
Since taking office in 2021, Torres also staked out a position as one of Israel’s most stalwart supporters, for which he’s been remunerated by the pro-Israel lobby. Torres has appeared at conferences of the American Israel Public Affairs Committee (AIPAC) and received over $140,000 from the PAC and individual contributors associated with the group in 2022, making them his top contributor. His office did not respond to a request for comment to clarify whether he sees these two policy priorities—defending Israel and opposing crypto regulations—as at odds in light of the attack.
The fact that terrorist groups, from al-Qaeda to ISIS, use crypto, has become such common knowledge that it’s all but faded into the background of the discussion.
When Torres was asked on MSNBC this week about Hamas’s fundraising through crypto, he placed the blame specifically on one bad actor: the Chinese crypto exchange Binance.
“The reports underscore the need for regulation. Back in April I pressured the SEC to prioritize action against deregulated offshore exchanges because those carry the greatest risk … In June the SEC did take action against Binance, which holds the Hamas accounts.”
Binance was cited for numerous explicit violations by the SEC this summer, including misleading investors and selling unregistered assets. It’s just about the only action Gensler and Torres have seen eye to eye on.
However, Binance was just one of many exchanges named by the Journal in connection with Hamas. For example, an accompanying Journal report this past week investigated the Moscow-based exchange Garantex, linked to both sanctioned Russian government actors and Palestinian Islamic Jihad, which joined Hamas in the attacks.
The reports suggest that a more wide-ranging network facilitated Hamas’s financing, rather than just a single illicit exchange. The financial technology’s most highlighted attribute—its anonymity for users—is exactly what makes it difficult to trace the specific channels and exchanges used by Hamas to transfer funds.
This is not a new issue either. The fact that terrorist groups, from al-Qaeda to ISIS, use crypto, has become such common knowledge that it’s all but faded into the background of the discussion. For years, government reports, hearings, and outside research have warned about this threat.
Reps. Jake Auchincloss (D-MA) and Josh Gottheimer (D-NJ) broke ranks with the Blockchain Eight and signed Warren’s letter. This signals that Hamas’s crypto financing reverberated around the Hill, and could be just the beginning of backlash to come.
When asked about Auchincloss’s motivation for signing the letter and whether it signaled a change in his approach to crypto enforcement moving forward, Auchincloss spokesperson Matthew Corridoni said, “He’s been very on the record about the need for crypto regulation and also is one of the most vocal members of Congress when it comes to speaking out against the horrors of Hamas.”
The letter is only a stepping stone. Many of the points it makes and questions it directs to the administration echo a piece of legislation introduced by Sens. Warren and Roger Marshall (R-KS) that could actually address crypto money laundering by terrorist organizations.
In conjunction with the letter, Sen. Warren is renewing a legislative push for the Digital Asset Anti-Money Laundering Act. The bill would effectively provide new regulatory tools for the Treasury Department to expand enforcement of anti–money laundering laws that currently apply for banks and other financial institutions but not crypto exchanges. The main legal tool on the books is the Bank Secrecy Act, which requires banks to combat money laundering in coordination with government authorities. After the terrorist attacks on September 11, which al-Qaeda financed through money laundering, Congress expanded the scope of the Bank Secrecy Act with greater reporting requirements. This would move in the same direction.
Boosters of the crypto industry have fought against Warren’s legislation since it was introduced, and claimed it’s a stalking horse to “ban crypto” entirely, as a CoinDesk op-ed argued.
The legislation has received bipartisan support from 13 other senators. So far, many of the congressmembers signed on to the letter, such as Reps. Auchincloss and Gottheimer, have not yet supported the bill. As Warren’s office sees it, the letter is a way to build momentum. A spokesperson for Sen. Warren says the bill is getting a fresh look from other offices in the wake of the attacks.
