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Committee chairman Sen. Sherrod Brown (D-OH) listens to testimony

Senate push for crypto crackdown runs deeper than Hamas financing

The crypto industry has spent a lot of energy this month trying to dispute its sector’s role in financing global terrorism. So far, Washington isn’t listening.

The controversy has swirled around a widely-cited article in the Wall Street Journal published days after the deadly Oct. 7 attack on Israel detailing how Hamas may have used crypto to fund its terror operations.

Since then, that story has become a fixation for policymakers and crypto advocates alike. Lawmakers have cited the report in letters to the Treasury Department urging a broader crackdown on crypto. In turn, crypto boosters have strongly disputed the report’s findings. Trade group CEOs have requested corrections, and individual advocates have offered thousands of dollars in “bounties” to disprove the story.

The counter-campaign has yielded one small success — a narrow correction added to the Journal’s story last Friday.

But key policymakers pushing for tougher rules for crypto, particularly around stronger money laundering controls, haven’t been swayed by these efforts.

“It’s not about one report,” Sen. Elizabeth Warren (D-Mass.) told us Monday night. “It’s about the whole structure of crypto that attracts some of the worst people around the world to move value around in a way that they cannot do through the ordinary banking system.”

Senate Banking Committee Chair Sherrod Brown (D-Ohio) echoed Warren’s view, saying that crypto has “clearly had a role in terrorism. It clearly has a role in fentanyl, a role in all kinds of illicit criminal activity.”

And like many other lawmakers we talk to about digital assets, Brown pointed to the collapse of the crypto exchange FTX as the moment the sector’s benefit of the doubt evaporated in Washington.

Even crypto-friendly lawmakers like Sen. Cynthia Lummis (R-Wyo.) have said the sector has work to do in policing illicit activity, though they tend to focus on the role played by international firms, which include Binance and Tether.

That said, Lummis also told us on Monday that she was “concerned” about the impact the WSJ’s story has had on the crypto policy discussion being had by lawmakers right now. Lummis wants crypto to be appropriately regulated within the United States, rather than regulated out of existence or pushed offshore.

“I do think the Wall Street Journal article was debunked to the extent that it overstated the amount of cryptocurrency that was being used,” Lummis said. Lummis added later: “Those that were already predisposed in the Senate to believing that there’s no legitimate use case for digital assets — it sort of reinforces that view.”

House Republicans have said they’re keen to fit crypto legislation into year-end legislative packages. Senate Republicans, meanwhile, are focused on pressuring the Biden administration to use existing sanctions to hammer Hamas and Iran.

Sen. Katie Britt (R-Ala.) said the Biden administration needs to use “the tools we have with regards to sanctions right now” rather than pursue bigger changes. “I keep seeing people try to divert the conversation to different things right now,” she said.

— Brendan Pedersen

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