The U.S. legislator that ‘crypto bros’ disparagingly call “Pocahontas” is showing no signs of abandoning her anti-crypto warpath anytime soon.
On Monday, Sen. Elizabeth Warren (D-MA) sent a letter to Kristin Smith, CEO of the Blockchain Association, expressing her concern over reports that “your association and other crypto interests” are amassing “a small army” of ex-government officials to “undermine bipartisan efforts in Congress and the Biden Administration to address the role of cryptocurrency in financing Hamas and other terrorist organizations.”
Warren sent similar letters to Coin Center, the D.C.-based non-profit research and advocacy group, and Coinbase (NASDAQ: COIN), the largest U.S.-licensed digital asset exchange. The letters were sent the same day Coinbase was named as a key contributor to Fairshake, a new super political action committee that has raised $78 million to help fund pro-crypto candidates in the 2024 election cycle.
Warren’s concerns were sparked by a recent Politico report on how Coinbase has been adding some notable D.C. figures to its ‘global advisory council,’ including former Defense Secretary Mark Esper, former Bush-era counterterrorism adviser Frances Townsend, and former Rep. Stephanie Murphy (D-FL). Existing council members include former Sen. Patrick Toomey (R-PA) and former Representatives Tim Ryan (D-OH) and Patrick Maloney (D-NY).
Recently, the Blockchain Association sent a letter to members of the Senate Banking Committee and House Financial Services Committee signed by a bevy of individuals with backgrounds in both digital assets and the military. The letter urged the politicians to ignore media reports about the October 7 attack on Israel by Hamas terrorists—specifically, the role played by digital assets in financing activities by Hamas and other terror groups.
Warren has her own small army of allies on Capitol Hill, 105 of whom added their names to a letter urging the Biden administration to “swiftly and categorically” crackdown on terror groups’ use of blockchain technology to help finance their operations. But Warren’s new letters take specific issue with blockchain groups padding their payrolls with ex-pols, military, and intelligence officials, and she wants these groups to come clean regarding the intentions behind these hires.
It’s a living
The Politico report quoted a warning from the Revolving Door Project’s Henry Burke that anti-terror officials who take roles with digital asset companies are problematic for three reasons: they know law enforcement’s weak points; they legitimize the digital asset industry to colleagues still in government positions; and their example incentivizes favorable treatment by government workers who hope to land cushy blockchain jobs of their own someday.
Warren’s letter to the Blockchain Association picks up this thread, saying, “[t]his abuse of the revolving door is appalling, revealing that the crypto industry is spending millions to give itself a veneer of legitimacy while fighting tooth and nail to stonewall common sense rules designed to restrict the use of crypto for terror financing—rules that could cut into crypto company profits.”
Warren says both Congress and the public “deserve transparency about the extent to which crypto firms are using revolving door practices to fight efforts to close holes in current anti-money laundering and terrorist finance laws.” As such, Warren wants the three recipients of her letter to answer specific questions by January 14, 2024.
These queries include providing a full list of former military and civilian government officials and politicians on their payrolls, how much they’re paid, what responsibilities they’ve been given, which current administration officials they’ve met with, all legislative or regulatory activities they’ve been involved with, and whether the companies discussed the possibility of working together while these individuals were still in government positions.
You’re not the boss of me!
Blockchain Association CEO Smith tweeted her reaction to Warren’s letter, calling it “yet another disappointing step taken by Sen. Warren to discredit our industry and the individuals who are working to build a more inclusive financial system and user-focused internet.”
According to Smith, all Americans “share the common goal of fighting terrorism and protecting our national security.” Smith suggested Warren “focus her efforts on the perpetrators, not those working hand-in-hand with U.S. law enforcement to catch bad actors.”
Coin Center executive director Jerry Brito tweeted that his group received “the same important letter” as the Blockchain Association and Coinbase. Coin Center’s response to Warren argued that “[e]ngaging like-minded experts to advocate against legislative proposals that one sincerely believes are unconstitutional and detrimental to the nation’s welfare does not constitute ‘undermining bipartisan efforts in Congress.'”
Coinbase’s chief legal officer Paul Grewal tweeted his objection to Warren “smearing the integrity of people who have served our country, in uniform and otherwise.” Grewal reply-quoted a tweet indicating Warren’s own office has seen some revolving door action of its own with the traditional banking sector.
Capito(l) crimes
Crypto-terror concerns are by no means unique to Warren, or even the Democratic party. Last week, Sen. Shelley Moore Capito (R-WV) sent a letter to Brian Nelson, the Treasury Department’s Under Secretary for Terrorism and Financial Intelligence, seeking more information on “the scope of digital asset financing used by FTOs [Foreign Terrorist Organizations] in the attack against Israel.”
Capito had her own list of queries for Nelson, including whether Treasury had begun “an independent and comprehensive investigation” into just how big the crypto-terror connection might be. Capito also wanted to know the extent to which terrorists utilize coin mixers and “how quickly foreign mixers can be stood up once another might be shut down or subjected to sanctions?”
Someone should alert Capito that Coin Center is currently waging a legal fight against the Treasury Department’s Office of Foreign Assets Control (OFAC) over the sanctions OFAC imposed against the Tornado Cash mixer in August 2022. While Coin Center’s suit against OFAC was dismissed on October 30, Coin Center filed an appeal this week, still arguing that the feds are in the wrong by targeting Tornado Cash in a bid to disrupt digital asset laundering by the likes of North Korea.
High hopes, low returns
While Coinbase and other blockchain boondogglers may be spending big to support crypto-friendly pols, it’s worth noting that none of these efforts have so far produced any tangible forward momentum whatsoever. Despite all the funding splashed out by Coinbase, Binance, and other groups—most notably Sam Bankman-Fried’s bottomless generosity with his customers’ money—the sector is no closer to its goal of bespoke ‘light touch’ regulations and a consequence-free operating environment.
This inertia was on full display earlier this month when no digital asset provisions—neither pro nor con—made the final version of the National Defense Authorization Act. Standalone digital asset bills fared no better, but given that the current Congress is officially the most unproductive in modern history, expecting movement on issues that don’t really matter to most Americans only exposes the myopia of the single-issue voter.
Earlier this month, Warren announced that the proposed Digital Asset Anti-Money Laundering Act she and Sen. Roger Marshall (R-KS) introduced in December 2022
and reintroduced this summer had received five additional sponsors, including three members of the Senate banking committee. Will it matter? Probably not.
But should further evidence come to light of terror groups using specific blockchains, exchanges, and/or protocols to conduct fresh attacks, all bets are off. The heightened tensions of a presidential election year could convince some congressional fence-sitters to take whatever steps they deem necessary to demonstrate their anti-terror bona fides.
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple, Ethereum,
FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.
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