U.S. Senate's Banking Chairman Says Panel to 'Crack Down' on Crypto's Terrorism Ties

U.S. Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee, said the panel will "crack down on the use of crypto to fund terrorism and evade sanctions" at a time when the U.S. must stand with Israel as it combats "Iranian-backed terrorists like Hamas."

"We can work to cut off funding for terrorism at its source," said Brown, who could have an outsized role in crypto policymaking as head of the panel that oversees U.S. financial watchdogs. The senator said during a Thursday hearing on illicit finance that his committee "will examine multiple terrorist funding streams, including cryptocurrency, and consider additional measures to stop the flow of those funds."

Recent reports about the role of crypto in the Israel-Hamas conflict misinterpreted and hugely exaggerated data, according to blockchain analytical firm Elliptic. Chainalysis, a rival analytics firm, made a similar statement earlier last week.

On October 10, The Wall Street Journal linked Hamas with tens of millions in crypto donations. But Elliptic said this week that, while Hamas "has begun to experiment" with digital-asset fundraising, "the amounts raised remain tiny compared to other funding sources."

As one of the WSJ's main sources for data pushes back on the accuracy of the reporting, many crypto proponents have asked the WSJ to correct the record.

In the hearing, Sen. Brown mentioned fellow committee member Sen. Elizabeth Warren (D-Mass.), among more than 100 other U.S. lawmakers who urged federal agencies last week to cork the flow of crypto to terrorists. Backed by the WSJ's earlier reporting, Warren led that major response, further justifying her legislative push to go after money laundering and sanctions abuses in crypto.

"I’m glad that members of this committee ... have put forward bipartisan plans for closing gaps around digital assets in our illicit finance rules," Brown said, also referring to a legislative initiative from Sen. Jack Reed and others to demand decentralized finance (DeFi) projects meet similar standards as traditional financial firms. "We’ll work together on this committee, in a bipartisan way, to make sure terrorists and bad actors can’t exploit crypto."

Warren's office didn't respond to an earlier CoinDesk request for comment on the confusion over Hamas's crypto relationships. The Blockchain Innovation Project – led by two former members of Congress, David McIntosh, an Indiana Republican, and Tim Ryan, an Ohio Democrat – sent a letter to the Massachusetts senator and others to counter the lawmakers' recent claims.

Brown, who argued that crypto platforms don't use common-sense safeguards that "keep illicit money out of the traditional banking system," has been a vocal critic of the industry, especially in the period after the collapse of FTX. But his committee would have to consider and approve any serious piece of digital assets legislation.

And he said last week’s steps taken by the U.S. Treasury to sanction several individuals and entities allegedly supporting Hamas terrorist operations, including a Gaza-based exchange, are "not enough.“

"The administration must take additional steps to impose sanctions and dedicate resources toward a multilateral effort to coordinate with allies to track, freeze, and seize any Hamas-related assets, and take steps necessary to deny Hamas terrorists the ability to raise funds,” he added.

Iran is widely understood to be the main sponsor of Palestinian terror groups currently at war with Israel.

Attempts to block crypto funding for terrorism often become a game of whack-a-mole, Brown noted, because law enforcement may stop one transaction while criminals move to another platform, using another alias. “Terrorists know they can use crypto in ways they could never use dollars.”

Read More: Media Reported Hamas Got Millions Via Crypto, but the Data Provider They Cited Says It Was Misconstrued

UPDATE 10/26/23; 16:40 UTC: This story was updated with additional comments from Sherrod Brown.

UPDATE 10/26/23; 18:21 UTC: Adds reference to Sen. Reed's illicit-finance bill.