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- Experts believe the new request by the US Treasury to have utmost control over all US dollar-backed stablecoins, even overseas, will accelerate the ongoing de-dollarization as privacy is key for mainstream blockchain adoption.
- The war on private stablecoins comes after the US Treasury Department butchered Binance Holdings last month with a $4.3 billion historical fine.
The ongoing debate in the United States on how best to regulate the nascent blockchain technology, web3 industry, and crypto assets is expected to take center stage in the 2024 presidential elections. With over 55 million American voters already invested in the crypto market, every aspirant seeking public office is keen on how to regulate the crypto market. However, the United States Treasury Department is pushing the regulators in Congress to expand its powers over blockchain transactions – including overseas crypto projects – to control terrorism funding, especially in the ongoing Israel vs Palestine war.
Moreover, the National Bureau for Counter Terror Financing of Israel with the help of on-chain analytics firms identified about $93 million in digital assets under the control of the Palestinian Islamic Jihad (PIJ) and Hezbollah.
Private Stablecoins Under the Scope
In the past two years, the United States Federal Reserve has struggled to bring down inflation to the desired 2 percent despite the periodic interest rate hikes. In a bid to regain control of the financial system, the United States federal government has turned on the crypto asset industry.
With centralized crypto exchanges already under siege, the US Department of Treasury has turned its focus on private stablecoins like Tether (USDT) and Circle USDC. Notably, the Deputy Secretary of the Treasury Wally Adeyemo has written an official proposal to Congress on how to expand the department’s authority in the digital asset space.
Modes of raising and moving money continue to evolve and many of our authorities have not been updated in decades. Terrorist groups – including Hamas – use new virtual methods to move, store, and obfuscate their funding streams. These methods often include the use of evasive cryptocurrency networks and services, including mixers,
As a result, private stablecoins like Circle USDC have begun lobbying with the regulators to avoid punitive laws. For instance, Circle’s Chief Strategy Officer and head of global policy, Dante Disparte, wrote a formal letter to Senators Sherrod Brown and Elizabeth Warren to distance the firm from enabling mass murder through terrorism funding.
However, Wally insisted that stablecoin transactions that are denominated in the United States dollar should be regulated under more inclusive laws.
Define a new cryptocurrency-related category of “financial institution” under the BSA, which includes but is not limited to cryptocurrency exchanges, Virtual Asset Service Providers (VASPs), virtual asset wallet providers, certain blockchain validator nodes, and decentralized finance services and subject it to the type of AML/CFT requirements to which banks and other financial institutions are already subject,
Experts’ Take
With the ongoing de-dollarization fueled by the rise of the BRICS alliance, Austin Campbell, founder and managing partner at Zero-Knowledge Consulting, argued that the Treasury intends to create unnecessary war with the international community for overstepping its jurisdiction. Additionally, Austing added that the new Treasury proposal requires the impossible from web3 software providers that do not have control over how people use their products
