Experts tell subcommittee illicit finance and cryptocurrency complicate sanctions; call for allied cooperation

Witnesses and members discussed how terrorist groups adapt financing methods, including use of cryptocurrency, and how State and Treasury coordinate to disrupt those networks.

Why it matters: disrupting illicit finance is central to degrading terrorist capabilities; the rise of cryptocurrency and alternate payment mechanisms could undermine traditional sanctions and requires multinational cooperation.

Ambassador Sales described the division of labor between State and Treasury: State handles designation of terrorist actors while Treasury, including the Office of Foreign Assets Control, focuses on financiers and enablers. "CT Bureau has the authority to impose sanctions on those who engage in terrorism...Treasury has the authority to impose sanctions on those that enable or facilitate or raise money for terrorist organizations," Sales said.

Representative Brad Sherman and others raised concerns about cryptocurrency and whether its growth could weaken sanctions pressure on states such as Iran. Sales and Dr. Byman both said crypto platforms that seek legitimacy will need to cooperate with investigators and Treasury; if they do not, they risk being excluded from regulated markets. Sales pointed to other pressure points such as insurance and shipping where leverage can still be applied.

Members referenced recent law enforcement actions, including an FBI cryptocurrency indictment placed in the record, as evidence criminal enforcement is active but that evolving payment systems require continued attention and allied cooperation. No new legislative measures were adopted at the hearing.