Lawmakers in the U.S. are cracking down on cryptocurrency to disrupt funding to Hamas, bringing attention (once again) to digital currency’s darker uses.
Driving the news: The U.S. Treasury Department has proposed rules that would classify cryptocurrency mixers — which take funds, mix them with those from other users and return them to make tracing difficult — as money laundering tools that threaten national security.
- The U.S. also issued sanctions on nine people and one exchange it said were linked to Hamas, following a letter from 105 lawmakers urging it to look into the matter.
Why it matters: Hamas’ attack on Israel has fueled those eager to curb crypto’s use in illicit activities. A lobbyist told the Financial Times this will make it harder to pass laws legitimizing crypto, while Coinbase claimed the events are being used to “further an anti-crypto agenda.”
Zoom out: Decentralized currencies have a documented history in dark web transactions and online scams. They also give a fundraising avenue to terrorist groups without access to traditional banking (though analysis shows crypto makes up a small part of Hamas’ funding).
-
Crypto has been used to skirt sanctions against Russia, but its ability to reach conflict zones has streamlined millions of dollars into Ukraine’s war efforts against Russia.
- Mixers were already on authorities’ radar. Last year, the U.S. sanctioned mixers Tornado Cash and Blender.io for allegedly supporting a North Korean hacker group.
Yes, but: Lawmaker scrutiny isn’t dampening renewed crypto optimism. This week, Bitcoin prices topped $41,000 for the first time since the 2022 “crypto winter” began, while shares in Coinbase and Grayscale Bitcoin Trust were up 7% and 5%, respectively, on Tuesday. —JK