During the Annual Oversight of Wall Street Firms hearing before the Senate Committee on Banking, Housing and Urban Affairs on December 6, Senator Elizabeth Warren (D-MA) questioned bank CEOs about illegal financial activities involving cryptocurrencies, as part of a broader approach. efforts to advance regulation. Present at the hearing were the CEOs of JPMorgan, Wells Fargo, Citigroup, Morgan Stanley, Goldman Sachs and more.
Senator Warren used her time to draw attention to the use of cryptocurrencies for illegal financing. Warren cited estimates that $20 billion worth of crypto transactions funded criminal organizations and rogue regimes last year. She called for legislation to be updated so that anti-money laundering regulations also cover cryptocurrencies like traditional banking.
Cryptocurrency, she declared, “is the new way today’s terrorists are circumventing the Bank Secrecy Act.” She cited alarming statistics, such as an estimated $20 billion in illegal crypto transactions last year that funded various dangerous criminal activities. She explained:
“Now the laws clearly need to be updated, but crypto lobbyists are working overtime to block any legislation. They argue that crypto is special, and that it doesn’t have to comply with the Bank Secrecy Act, even if that means terrorists, drug traffickers, ransomware criminals, and rogue states have to move billions of dollars. Totally unlimited.”
Instead of calling for crypto bans, Senator Warren called for banning the use of crypto by criminal organizations, terrorists, and rogue states. However, JPMorgan CEO Jamie Dimon went further and agreed that the predominant use case for cryptocurrencies currently falls under “criminals, drug traffickers, anti-money laundering.” [violations]tax evasion.”
Dimon took the toughest stand of the day. While admitting that the anonymous nature of crypto transfers was not entirely accurate, he drew attention to the ability of a crypto network to move large amounts of money instantly anywhere without going through regulatory checkpoints:
“You can transfer money immediately because it doesn’t go through, as you said, all those systems that we’ve built over the years – know-your-customer, sanctions, OFAC; it can bypass all that. me as me [were] the government, I would close it down.”
In addressing these concerns, Senator Warren advocated expanding anti-money laundering regulations to include cryptocurrencies. The time for Congress to act is now, she said, emphasizing the need to prevent terrorist attacks or rogue states’ programs from being funded through unregulated crypto transactions.
Rules and regulations
While CEOs unanimously agreed that cryptocurrencies should be subject to the same anti-money laundering rules as traditional banks, they consistently expressed opposition to perceived over-regulation in their own sector.
The discussion on cryptocurrencies was part of a broader hearing on financial regulation. Bank CEOs warned lawmakers about the potential economic impact of the proposed new regulations. They raised concerns about the proposed ‘Basel Endgame III’ rule and others, citing fears that these regulations could hinder lending, hurt small businesses and have a negative impact on the broader economy.
While these banking giants are pushing back against what they see as burdensome regulations, there is unanimous agreement among them on the need for cryptocurrencies to be subject to anti-money laundering regulations. According to them, this is a necessary step towards preventing the misuse of these digital assets for illegal activities at a rare moment of agreement between banks and their regulators.
