- US Treasury Secretary Janet Yellen wants more authority to regulate the crypto industry.
- Madam Secretary, in her many appearances on Capitol Hill, has underscored the risk inherent in the crypto industry.
- Despite Yellen’s push for stringent regulatory frameworks, protocols are actively working to mitigate illicit activities.
The crypto industry is once again in the government’s crosshairs, this time with US Treasury Secretary Janet Yellen taking the shot. During a series of appearances on Capitol Hill, the Treasury chief has been adamant about pushing crypto regulation and expanding its control over the industry through new legislation.
Secretary Yellen Insists on More Authority to Address Crypto Terror Financing
During Thursday’s Senate Banking Committee hearing, Senator Sherrod Brown raised concerns to Treasury Secretary Janet Yellen regarding the use of crypto by bad actors, particularly terrorist groups like Hamas, Al-Qaeda, and Hezbollah, for fundraising and money laundering.
"We have important tools to counter illicit finance, but most of them date back to the post-9/11 era. As terrorists continue to innovate, do we need to update our counter-terrorism tools, Madam Secretary, to respond to the risks created by digital assets?” He asked.
In response, Secretary Yellen acknowledged that the US Treasury, despite having several authorities, had several gaps in its effectiveness. Yellen added that the Treasury was proactively working on suggestions to bolster its authority.
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Although Madam Secretary didn’t share details of her proposals, during her recent address on Capitol Hill, she emphasized the imperative for swift legislative action. Her call was clear: lawmakers must immediately establish federal regulatory standards for the crypto industry, explicitly targeting stablecoins.
Secretary Yellen Takes Aim at Stablecoins
Addressing lawmakers, Yellen highlighted the risks inherent in cryptocurrencies, pointing to their price volatility. She underscored that stablecoins posed risks to the financial system that the Financial Stability Oversight Council (FSOC) and the President’s Working Group on Financial Markets initiated.
Secretary Yellen’s view echoed the US Treasury’s latest National Risk Assessment for 2024. The report emphasized that while cash, commonly the US dollar, remains the primary method for illicit activities, the increasing adoption of cryptocurrencies is a growing concern and necessitates immediate action.
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While the US Treasury acknowledged the benefits of blockchain technology, such as transparency, it emphasized that certain elements, such as its pseudonymous nature, facilitated terror financing and allowed malicious actors to facilitate activities off-chain.
Still, despite Yellen’s pessimistic outlook on the crypto industry, major stablecoin issuers are taking proactive measures to curb illicit activities.
USDT’s Proactive Approach to Terror Financing
As part of its continued dedication to enhancing the integrity of the crypto space, USDT Issuer Tether unveiled its wallet-freezing policy in December 2023. The new policy aligned with the US Office of Foreign Asset Controls (OFAC) regulations and mainly focused on sanctioned persons on the Specially Designated Nationals (SDN) list.
Further emphasizing its commitment to mitigating illicit activities facilitated by stablecoins, Tether’s CEO announced that it had onboarded the US Secret Service and is doing the same with the FBI.
So far, Tether has helped law enforcement restrict access to over 200 wallets, freezing over 3.5 million USDT. After pushing the new policy, it froze an additional 326 wallets, totaling over $435 million.
On The Flipside
- Janet Yellen holds a publicly negative view of the crypto industry.
- Senator Sherrod Brown, who chairs the Senate Banking Committee, is working on a bill targeting the use of cryptocurrencies for money laundering.
- In 2023, The US House Financial Services Committee advanced pro-crypto bills, which would lay the groundwork for regulatory certainty.
Why This Matters
The fate of the crypto industry in the US depends heavily on the effectiveness of pro-crypto regulatory frameworks. Despite concerns about terror financing, money laundering, and other illicit activities associated with crypto, the US government must strike a balance. It should address misuse without stifling the industry’s potential for innovation.
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