Crypto Illicit Activity in Focus: US House FSC Hearing

On November 15, the Financial Services Committee (FSC) of the United States slated a hearing to conduct an in-depth examination of the illicit operations within the cryptocurrency ecosystem.

At the hearing titled “Crypto crime in context deconstructing the illicit activity in digital assets,” notable crypto entrepreneurs are scheduled to participate.

Mr. Bill Hughes, senior counsel and director of global regulatory matters at Consensys, and Mr. Jonathan Levin, co-founder and chief strategy officer at Chainalysis, are listed as witnesses for the hearing on the Committee’s calendar.

Jane Khodarkovsky, an expert in human trafficking finances and a former federal officer, will accompany the two defendants as a witness.

The Committee memorandum regarding the hearing elucidates the motivation of the FSC:

“To ensure that the digital asset ecosystem is not exploited by bad actors, it is critical that Congress understand the degree to which illicit activity exists, what tools are available to combat this activity and explore any potential gaps to prevent and detect illicit activity.”

The hearing will primarily focus on deliberations about unlawful activities, including the financing of terrorism and money laundering.

According to a January 2023 report by Chainalysis cited by the FSC, illicit cryptocurrency volumes reached an all-time high due to an increase in sanction designations and cyberattacks.

The hearing will also assess the extent to which decentralized finance (DeFi) providers and cryptocurrency exchanges have implemented anti-money laundering and counter-terrorism financing (AML/CTF) measures.

At the hearing, regulating entities such as the Department of Justice (DOJ), the Financial Crimes Enforcement Network (FinCEN), and the Office of Foreign Assets Control (OFAC) will also be examined in terms of their functions.

The chairman of the FSC, Patrick McHenry, declared the drafting of legislation in July to establish regulatory clarity regarding the issuance of payment-oriented stablecoins.

In a concurrent effort, the DOJ has increased the size of its crypto crime team by twofold.

The DOJ formed the new “super-charged” unit, which was entrusted with combating ransomware crimes, by combining its two teams, namely the National Cryptocurrency Enforcement Team (NCET) and the Computer Crime and Intellectual Property Section (CCIPS).