US Prepares to Cut Off Crypto Firms for Illicit Activity

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The US government will cut off cryptocurrency firms from the broader U.S. economy if they fail to block and report illicit money flows, Deputy Treasury Secretary Wally Adeyemo warned the industry on Wednesday.

Speaking at an event hosted by the Blockchain Association, Adeyemo said that crypto firms need to do more to curtail the flow of illicit finance and that the lack of action across the sector presents a risk to the US.

“Our actions over the last year send a clear message: we will not hesitate to bring to bear tools across government to protect our national security,” Adeyemo stated.

The Biden administration on Tuesday sent a letter to Congress, requesting new legislation that would grant Treasury the authority to police crypto marketplaces used by actors the US government deems illicit, Adeyemo said.

The move comes after the US issued sanctions in October aimed at disrupting funding for Palestinian militant group Hamas following deadly attacks in Israel, singling out a Gaza-based cryptocurrency exchange among other targets.

Last week, Binance ex-CEO Changpeng Zhao pleaded guilty to breaking US anti-money laundering laws as part of a $4.3 billion settlement, and stepped down as CEO of the world’s largest crypto exchange, conceding that he had “made mistakes.”

Prosecutors said Binance broke US anti-money laundering and sanctions laws and failed to report more than 100,000 suspicious transactions with organizations the US identified as terrorist groups including Hamas, al Qaeda, and the Islamic State of Iraq and Syria, authorities said. Binance said in response that it had worked hard to make the platform “safer and even more secure.”

The US crackdown on crypto firms comes amid a global surge in the popularity and value of crypto, which has attracted millions of investors and enthusiasts, as well as criminals and terrorists seeking to evade traditional financial systems.

Adeyemo said that the US welcomes innovation and competition in the crypto space, but that it also expects compliance and accountability from the firms involved.

“We are not here to stifle innovation, but to ensure that it is done in a way that protects our national security, our financial system, and the American people,” he said.

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