House hearing on FinCEN oversight sparks debate on the role of cryptocurrencies in illicit activities.
During a House Financial Services Committee hearing on Wednesday, the focus turned to cryptocurrencies and their potential involvement in illicit financing. The hearing, which was held to discuss the oversight of the Financial Crimes Enforcement Network (FinCEN) and the Office of Terrorism and Financial Intelligence (TFI), saw FinCEN director Andrea Gacki and TFI undersecretary Brian Nelson as witnesses.
The issue of how frequently digital assets are used to fund illicit activities has become a contentious topic among lawmakers and federal agencies. Democratic lawmakers previously cited an article from the Wall Street Journal claiming that Hamas had raised “millions” in cryptocurrency, a statistic that crypto analytics firm Elliptic found no evidence to support. Nelson acknowledged that the Treasury believes this figure is inflated and stated that terrorists still prefer traditional financial products and services.
While cryptocurrencies are seen as a growing threat in terms of illicit finance, the primary tool for money laundering remains fiat currency, according to Treasury officials as stated in the 2024 National Risks Assessments. Republican Representative Tom Emmer questioned why the Treasury has not corrected the record if it knows that many figures regarding crypto financing are incorrect. Emmer argued that the Treasury has access to data that can paint an accurate picture of how cryptocurrencies are used, and it has a responsibility to clarify misleading narratives.
Democratic Representative Brad Sherman expressed concern about cryptocurrency as a financial instrument that threatens US authority. He accused crypto promoters of viewing the United States as an illegitimate player on the world stage and promoting crypto to weaken the federal government. Gacki emphasized the need for regulation and examination of all money services businesses.
Democratic Ranking member Maxine Waters called for increased funding for FinCEN, highlighting the bureau’s recent success in securing a record-breaking settlement with Binance. Waters argued that denying funding to the department would be misguided, especially as they tackle new threats like digital assets.
The hearing took place several months after FinCEN proposed rules for cryptocurrency mixing services, which would require regulated financial institutions to report transactions involving suspected mixers. The proposal has raised concerns among industry members who believe it goes beyond the agency’s jurisdiction. The Blockchain Association, in a letter responding to the proposal, stated that FinCEN’s failure to consider the legitimate uses of crypto mixing undermines its conclusion that it is a primary concern for money laundering. Gacki confirmed that they are reviewing the comments received on the proposed rule.