US proposes labeling anonymizing crypto practice as money laundering concern in wake of Hamas attacks

The Biden administration proposed Thursday labeling a cryptocurrency practice that provides customers with anonymity as a money laundering concern, amid a larger effort to crack down on illicit uses of crypto in the wake of Hamas’s surprise attacks on Israel.

The Treasury Department’s Financial Crimes Enforcement Network said the rule would identify international crypto mixing — a practice that anonymizes crypto funds by mixing them with others — as a primary money laundering concern and would require financial institutions to report transactions involving crypto mixing.

“Today’s action underscores Treasury’s commitment to combating the exploitation of Convertible Virtual Currency [CVC] mixing by a broad range of illicit actors, including state-affiliated cyber actors, cyber criminals, and terrorist groups,” Deputy Treasury Secretary Wally Adeyemo said in a statement.

“More broadly, the Treasury Department is aggressively combating illicit use of all aspects of the CVC ecosystem by terrorist groups, including Hamas and Palestinian Islamic Jihad,” Adeyemo added.

After Hamas launched a complex array of attacks from the Gaza Strip earlier this month that took Israeli forces by surprise, The Wall Street Journal reported that the Palestinian militant group had received about $41 million in crypto in the last two years.

Palestinian Islamic Jihad, another militant group based in Gaza, received as much as $93 million in crypto, according to the Journal.

More than 100 lawmakers sent a letter to the Biden administration Tuesday requesting information about the role crypto played in financing the recent Hamas attacks, as well as the administration’s plans to address the issue.

“Congress and this Administration must take strong action to thoroughly address crypto illicit finance risks before it can be used to finance another tragedy,” the lawmakers wrote in Tuesday’s letter.

The Treasury Department announced a new slate of sanctions against Hamas Wednesday, targeting several of the militant group’s members, a top commander, a Qatar-based financial facilitator and a cryptocurrency exchange based in Gaza.

“The US Treasury has a long history of effectively disrupting terror finance and we will not hesitate to use our tools against Hamas,” Treasury Secretary Janet Yellen said in a statement.