The Israel-Gaza war has once again thrown the spotlight on crypto, with anti-crypto politicians seizing on exaggerated reports of crypto being used to finance terrorism to introduce harsh new legislation with the potential to crush the industry.
Three days after Hamas carried out its brutal Oct. 7 attack, The Wall Street Journal published an inflammatory article stating that in the past three years, U.S.-designated terrorist organizations such as Hamas, Palestinian Islamic Jihad and Hezbollah had raised $134 million in crypto.
The article — later corrected following an online backlash — became ammunition for the anti-crypto army in Washington, which cited it to push for ever greater restrictions on crypto.
That came to a head over the past week with a bipartisan bill called the Terrorism Financing Prevention Act, introduced on Dec. 8. It obliges the Treasury to identify foreign financial institutions and crypto platforms that have knowingly conducted transactions with U.S.-designated terrorist outfits and enables it to impose sanctions to restrict U.S. bank accounts and block transactions.
Senator Mitt Romney tied the bill specifically to the Israel-Gaza war:
“The Oct. 7 attacks on Israel perpetrated by Hamas have made it more urgent and necessary for the U.S. to counter the role that cryptocurrency plays in the financing of terrorism.”
The war has also given new impetus to Senator Elizabeth Warren’s bipartisan Digital Asset AML Act (DAAMLA), which would extend the Bank Secrecy Act to cryptocurrencies. Five more senators signed up to cosponsor this bill on Dec. 11, and there are now 19 senators in total backing the legislation — or one in five senators — meaning it has gained serious traction. Galaxy’s head of firmwide research, Alex Thorn, argues “Warren’s bill would effectively outlaw crypto in America.”
Thorn believes that despite Warren’s poor record in getting bills passed, this one has a chance, given the “potent terrorism narrative post 10/7” and the “razor-thin R majority in House makes hard to thwart.”
Another earlier bill is also in play, the Crypto Asset National Security Enhancement (CANSEE) Act, which would dramatically increase surveillance over crypto transactions.
Warren appeared on CNBC’s Squawk Box last week to claim that all the major bank CEOs agreed with her on the need for urgent action.
“We have a serious problem in this country,” she said. “And that…