Bipartisan Anti-Crypto Terror Financing Bill Heads to U.S. Senate

  • A bipartisan group of senators introduced legislation targeting terror financing from digital assets.
  • Questions remain as to how useful crypto is for terror financing, with figures showing it is relatively small compared with traditional methods.

A bipartisan group of U.S. senators including Mitt Romney (R-UT) introduced legislation that expands sanctions to foreign entities supporting all U.S.-designated terrorist groups, including through crypto transactions, giving law enforcement an additional toolkit to tackle terror financing.

"The Terrorist Financing Prevention Act of 2023, introduced by the Senators, aims to prevent Foreign Terrorist Organizations and their financial enablers, including those using digital assets, from accessing U.S. financial institutions, imposing sanctions and strict regulations to counteract these activities," the bill reads.

The proposed act broadens current sanctions, initially focused on Hezbollah, to include all U.S.-designated foreign terrorist organizations and their supporting foreign entities.

“The October 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," Romney said in a release. "Our legislation would expand financial sanctions to cover all terrorist organizations – including Hamas– and it would equip the Treasury Department with additional resources to counter terrorism and address emerging threats involving digital assets.”

Disputed role in financing terror

Crypto as a tool for terror financing has long been a concern of regulators and law enforcement.

In the most recent debate among Republican presidential candidates, Vivek Ramaswamy – who has made support for crypto a pillar of his campaign – was asked a question that couched digital assets as a tool for "fraudsters, criminals, and terrorists."

The debate on whether crypto finances terrorism, sparked by a Wall Street Journal report saying Palestinian groups received substantial funds in crypto, is complex and unresolved, with blockchain analytics firms like Chainalysis suggesting such claims are likely overstated, CoinDesk recently reported.

There is no substantial evidence supporting significant crypto donations to Hamas, blockchain security firm Elliptic wrote in a recent post, and analysis suggests such claims are likely exaggerated.

The transparency of the blockchain and the sophistication of monitoring tools mean fund flows can be tracked and frozen. Binance, the world's largest crypto exchange, has frozen more than 100 accounts thought to be linked to Hamas at the request of Israeli law enforcement since the Oct. 7 attacks. As early as April, Hamas' military wing stopped accepting crypto donations in order to protect its supporters.

Hamas and Hezbollah, designated as terror organizations by the U.S. and many other jurisdictions worldwide, now increasingly use the Tron blockchain over Bitcoin, Reuters reported, but seizures amounted to less than 150 wallets and around $130 million.

In comparison, publicly released intelligence reports suggest that Hamas generates $1 billion per year, with $500 million coming from tax revenue and approximately $100 million from Iran.