US lawmakers want to know how terrorists use crypto

Lawmakers from both major parties are demanding to know more about how terrorists are abusing digital currencies’ anonymity and lack of oversight for nefarious purposes. And how to combat the scourge more effectively.

On Thursday, the US House of Representatives considered a bipartisan bill that would establish an independent financial technology task force to combat terrorism and illicit financing.

The Financial Technology Protection Act of 2023 is the latest version of a bill that was introduced in previous sessions. It is an attempt to grapple with new financial technologies, such as crypto, as they affect national security and financial stability.

Bipartisan war against terrorists

The bill’s new version, sponsored by Senators Kirsten Gillibrand (D-NY) and Ted Budd (R-NC) and Representatives Zach Nunn (R-IA) and Jim Himes (D-CT), aims to establish a task force. It will study the actual and potential use of cryptocurrencies and other new technologies by terrorists and criminals, Nunn told CoinDesk, according to a Yahoo news report Thursday.

The new group will consist of officials from across government agencies and departments. Including the Central Intelligence Agency, the Federal Bureau of Investigation, the Department of Justice, the Secret Service, the Financial Crimes Enforcement Network, and the State Department. Plus five individuals appointed by the Under Secretary for Terrorism and Financial Intelligence to represent financial technology companies, financial institutions and research organizations.

They will conduct independent research on digital assets, including crypto, and propose regulations. The working group must also submit annual reports to the financial secretary.

With cryptocrime on the rise, Congress is paying more attention to the interplay between finance, technology and crime. Last year, the illegal transaction volume reached a record high of $20.6 billion. Terrorist financing also increased from the previous year. Although not as much as in 2021.

Terrorism related to crypto

As recently as three years ago, about 5% of terrorist incidents had connections to crypto or digital assets. That number is more like 20% now, according to a senior UN official in a recent Bloomberg interview.

Crypto mixers like Tornado Cash have recently been in trouble for hiding financial links to organized crime. These crypto mixers work by combining multiple users’ cryptocurrency transactions to hide their source and destination. Sinbad.io, ChipMixer and Blender are all mixers that have come under fire for laundering funds for North Korea. However, breaking down its use may pose a privacy risk.

Crypto-related illegal activity accounts for less than 1% of the total volume. Despite an increase this year, the trend is downward.