Norbert Michel, vice president and director of the Cato Institute’s Center for Monetary and Financial Alternatives, said Sen. Elizabeth Warren (D-MA) is using Hamas as an excuse to advocate for her Digital Asset Anti‐Money Laundering Act. Warren sent a letter to the White House after Hamas's initial attack, citing now-debunked media reports that the terrorist group had raised tens of millions of dollars in cryptocurrency.
Michel argues that instead of dealing with the actual problem of terrorism, Warren's bill would increase financial surveillance on individuals and impose unworkable requirements on users of self-hosted wallets and operators of technological infrastructure.
"Yet rather than deal with the actual problem of terrorism, Warren’s bill would impose stricter anti‐money laundering rules on Americans who use digital assets (crypto). It would heighten the financial surveillance of individuals and impose possibly unworkable requirements on users of self‐hosted wallets as well as the operators of technological infrastructure that don’t even interface with transacting parties," Michel said. "It would do nothing to address specific acts of crime or violence or even the fraud that occurred with FTX. Simply put, it’s bad policy."
Michel also criticized Warren's claims last year that crypto serves as a "tool for terrorists" and other criminals, calling them "broad and sweeping." He pointed out that bad actors also use the U.S. dollar and various other financial instruments to commit crimes. Michel believes that focusing resources on apprehending terrorists directly would be a more effective strategy than imposing burdensome regulations on law-abiding citizens.
In a blog post, Michel argued that exaggerating the relationship between crime and crypto harms legitimate crypto businesses and hinders the appropriate allocation of law enforcement resources. He called for policymakers to conduct a "clear-eyed assessment" of digital assets' risks and benefits without exploiting unrelated tragedies.
Warren's Digital Asset Anti-Money Laundering Act aims to mitigate the risks that digital assets pose to national security. The legislation would require companies that facilitate crypto transactions to be designated as money service businesses (MSBs). These MSBs and banks would need to verify customer identities, keep records, and file reports on certain transactions. Financial institutions would also be prohibited from interacting with certain digital asset-related technologies.
The bill has been referred to the Senate Committee on Banking, Housing, and Urban Affairs, according to GovInfo.
Chainalysis said that although it had recently been reported that a terror financing-linked wallet had received $82 million in crypto from a Gaza-based service provider, the actual amount of crypto the wallet received was $450,000. While some terrorist groups do use crypto, most terrorist financing relies on traditional financial institutions and fiat-based methods. Chainalysis noted that the transparency of blockchain technology makes crypto traceable and less ideal for terrorist groups. The company emphasized that government agencies can partner with private sector firms to identify and seize terrorist funding, which is more challenging in the traditional financial ecosystem.
