US Treasury Says Crypto Plays Minor Role in Terror Funding

In a testimony before the US House Financial Services Committee Treasury undersecretary Brian Nelson debunked earlier media claims that crypto played a significant role in the October 2023 terror attacks on Israel.

In the conversation, Congressman Tom Emmer and Treasury Undersecretary Brian Nelson discussed the use of digital assets by terrorist organisations, particularly Hamas and the Palestinian Islamic Jihad.

To be clear, Hamas is using crypto in relatively small amounts compared to what’s been widely reported.

Tom Emmer

Nelson agreed with Emmer’s assessment, noting that while a Wall Street Journal article mentioned wallets, it did not detail how assets within these wallets were used. Nelson highlighted that terrorists still predominantly prefer traditional financing methods but acknowledged the importance of monitoring digital asset use.

He suggested a classified discussion for more precise information but indicated that the amount of digital assets used by these groups is likely not very high, due to effective identification of their financial facilitators and virtual asset service providers.

We don’t expect the number is very high. We also assess that terrorists still prefer, frankly, to use traditional products and services.

Brian Nelson

Nelson confirmed that digital assets are not a preferred or popular tool for terrorist financing, attributing part of this to collaboration with Israel.

Why Use Chainalysis When Treasury Has Relevant Data?

Emmer emphasised the need for accurate information, especially in light of incorrect reports exaggerating the use of crypto by these groups. He acknowledged the Treasury’s responsibility to provide accurate data and correct the record, mentioning that while there is awareness of potential misuse of cryptocurrencies by terrorists, the current uptake is not significant, though it remains an area of concern.

Sure, we can go to Chainalysis and use their third-party reporting, but Treasury already has the data. So, doesn’t Treasury have a responsibility to correct the record here?

Tom Emmer

Nelson replied that his agency had put out several reports covering illicit finance and virtual assets, and while Hamas specifically wasn’t necessarily using crypto, other terror groups do.