Israel-Hamas War Puts Cryptocurrency in CFTC, Treasury Crosshairs

The deputy secretary of the Treasury and the chair of the Commodity Futures Trading Commission both identified the “illicit financial use of digital assets” as a source of great concern, including as financing for Hamas. The remarks were made at a conference Tuesday, hosted by the Securities Industry and Financial Markets Association.

Deputy Secretary of the Treasury Wally Adeyemo said that cryptocurrencies are being used to finance Hamas and in a wide range of other illicit activity such as ransomware attacks. Adeyemo said Treasury will “take actions to go after that.”

Specifically, he said the department would take actions against “mixers” in digital assets under the Patriot Act. Mixers are services that obfuscate crypto transactions and can disguise the true buyers and sellers of the assets. Section 311 of the Patriot Act gives the Department of the Treasury “a range of options that can be adapted to target specific money laundering and terrorist financing.” 

The Office of Foreign Asset Control, the part of the Treasury Department that enforces most economic sanctions, announced on October 18 that Buy Cash, a crypto exchange based in Gaza, is blocked from the U.S. financial system for facilitating small-dollar donations to Hamas.

CFTC Chair Rostin Benham, speaking at the same conference, also noted that “illicit financial activity” involving cryptocurrency also is a focus for the regulator, especially in light of “what’s going on geopolitically,” a clear reference to the war in Gaza and Israel.

Speaking of general crypto enforcement, Benham said that “49% of our total docket” in enforcement actions “were in the digital asset space.” Benham called this a “remarkable statistic” and argued that Congress needs to grant the CFTC “more authority to police these markets.”

Speaking of Bitcoin and Ether, the chairman said that, “under existing law, these digital assets are commodities.”

This remark is consistent with what Securities and Exchange Commission Chairman Gary Gensler has said, which is that every digital asset except Bitcoin and Ether are likely securities. Gensler has likewise been extremely critical of the digital asset industry and has characterized it as “rife with fraud and scams and hucksters” in Congressional testimony.

Benham added that “we need to be aggressive about policing it, and our enforcement docket proves that case.”