House lawmakers to hash out crypto, illicit finance as AML bills come into focus

A congressional hearing later today to hash out crypto's alleged role in illicit finance could be influential as anti-money laundering come into focus in Republican-led legislation. 

A panel focused on digital assets within the House Financial Services Committee will convene this afternoon for a hearing titled "Crypto Crime in Context Part ll: Examining Approaches to Combat Illicit Activity." The subcommittee, led by Republican French Hill of Arkansas, will likely discuss how often terrorist groups turn to crypto to fund their operations compared to traditional finance as well as regulatory gaps in anti-money laundering requirements for crypto firms. 

Lawmakers will hear from policy and legal experts from Circle, Coinbase, TRM Labs and others who plan to talk about how legislation should be shaped to go after bad actors, how the blockchain can be traced and how decentralized finance factors in, according to prepared testimonies. 

The hearing comes as both Democrats and Republicans are honing in on AML provisions and bills. The full House Financial Services Committee advanced two bills last summer, one of which would take a comprehensive approach to regulate crypto. As of last month, Rep. Hill said that the larger bill includes an AML provision and signaled he was willing to listen to Democrats' ideas as well. 

House Financial Services Committee Chair Patrick McHenry, R-N.C., has also said that the House needs to take a closer look at AML rules for crypto, according to a report from Punchbowl News in December.

On the other side of the aisle, Senate Democrats have been working on bills to fight against money laundering, including one from Sen. Elizabeth Warren of Massachusetts that would expand AML responsibilities to digital asset services providers, miners, validators and others. Meanwhile Senate Banking Committee Chair Sherrod Brown, D-Ohio, has said he is in talks  about a bill that would target the use of digital assets for money laundering, according to Politico . 

The hearing will start at 2 p.m. ET and be livestreamed on the committee's website . 

Overstated 

The House Financial Services Committee held a hearing yesterday to review work by the U.S. Treasury Department and the Financial Crimes Enforcement Network where some lawmakers delved into crypto. 

Treasury's Under Secretary for Terrorism and Financial Intelligence Brian Nelson, who testified during that hearing, was asked about an October report from the Wall Street Journal that said Hamas, along with other militant groups used millions of dollars worth of crypto as a financing tool ahead of attacks in Israel. Data in that article came from blockchain forensics firm Elliptic, which has since said figures were misrepresented in the piece. 

Nelson confirmed that the numbers in the article were overstated. When asked by Majority Whip Tom Emmer, R-Minn., on how much crypto was used by Hamas, Nelson said he did not expect that figure to be very high.

"To be clear, Hamas is using crypto in relatively small amounts compared to what's been widely reported, that's correct?" Emmer said.

"That's our assessment," Nelson said.