US President Joe Biden appears to be increasingly convinced of the need for new crypto regulation.
Indeed, according to rumours circulating today, his staff has asked Congress to lend a hand in the fight against the illicit use of cryptocurrencies.
Biden: Request to Congress for new crypto regulation
The leak was reported by the Wall Street Journal, according to which Deputy Treasury Secretary Wally Adeyemo said that the Biden administration wants to get new powers from Congress to help crack down on the illicit use of cryptocurrencies.
Specifically, this concerns digital asset flows allegedly linked to the Palestinian militant group Hamas, which the US government would be partially powerless to stop.
Note that Hamas does not fall under US jurisdiction, nor would any donations from other states.
In other words, if such cryptocurrency donations come from other countries and never pass through US platforms, the Biden administration should have no power to intervene.
Obviously, they are referring to funds coming from the US itself, which they are powerless to curb.
Adeyemo, speaking at the annual meeting of the Securities Industry and Financial Markets Association in Washington, said the Treasury Department is in contact with both Democrats and Republicans to discuss possible actions that could be taken in this regard.
The election campaign
It may not have been a coincidence that these comments were made in a public meeting with a trade association representing securities firms, banks and asset managers.
It should not be forgotten that the US is due to hold presidential elections next year and that the current president, Joe Biden, is currently enjoying little support.
There is even speculation that he may decide to withdraw his candidacy for next year to make way for another Democrat with a better chance of winning, as his chances so far seem very slim.
In the meantime, he is trying to regain support and the war between Hamas and Israel is unfortunately a good opportunity for election propaganda.
Adeyemo said that Hamas’ attack on Israel has brought more attention to the illicit use of digital assets, as Hamas is publicly trying to raise funds through cryptocurrencies.
He added that he thinks Congress should intervene and that the current Democratic administration will work with Congress to get more tools.
Biden: crypto regulation in the US
However, there seems to be an implication that the Hamas fundraising affair is merely a pretext to seek greater powers in a general and generic sense with respect to the control of crypto financial flows.
The US does not yet have a clear and specific crypto regulation like the EU’s MiCA, although Congress has been working on it for years.
In fact, it is Congress (i.e. the US Parliament) that is supposed to legislate on the matter, but in fact it is blocked, probably because there is no common agreement on the proposed new rules.
On the one hand, there are those who believe that the right to freely dispose of one’s finances should be inviolable, as is the case with cryptocurrencies; on the other hand, there are those who believe that the state should instead exercise greater control, particularly to curb abuses.
In the specific case of Hamas, not all states in the world recognise it as a terrorist organisation, so the problem is specific to the United States and all those countries that do.
In the absence of specific laws, the only thing the government can probably do is ask Congress for special powers, but in more mature democracies ‘special powers’ are only given to governments in extreme cases.
The problem of mixers
Probably the most difficult problem to tackle is that of so-called mixers.
These technologies make it possible to lose track of where crypto money comes from. Moreover, if they are decentralised, it is impossible to stop them.
According to the US Treasury Department itself, international mixers allegedly act as money laundering centres, in particular by helping Hamas to raise funds.
Mixers are very difficult to combat, not only because they are impossible to stop if they are decentralised, but also because if they are international it is difficult for the US to have jurisdiction over them.
Action must therefore be taken either upstream, i.e. against the senders of these funds, or against any crypto platforms based in the US or willing to cooperate.
It should be added that many large crypto platforms now generally cooperate with law enforcement, so from that perspective it should not be a big problem to get their cooperation.
However, when funds are sent via mixers to Hamas or other organisations considered illegal or criminal, it becomes difficult to know who sent them and therefore which platform they may have used.
Hamas has no choice but to use platforms known to the authorities to get around the obstacles.