Israel has reportedly enacted new regulations related to the cryptocurrency industry in order to combat illegal activities like money laundering and terrorism financing.
The government of Israel enforced new Anti-Money Laundering (AML) regulations on Sunday, requiring local fintech companies and virtual currency service providers (VASPs) to obtain an operating license, local news agency Globes reported.
The Israel Securities Authority, the Capital Markets, Insurance and Savings Authority, the country’s independent financial regulator, is now reportedly in the process of reviewing various VASPs that have applied for such a license.
Shlomit Wegman, director of the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA), said that the new AML rules would help the country curb criminal usage of digital assets while also providing the industry with more support and legitimacy, The Jerusalem Post reported.
“The application of the regulations constitutes real progress for the Israeli economy, the fintech industry and for improving financial competition,” the official said.
The Israeli government has been actively working on regulations to combat illicit activities related to crypto this year. In July, Israel’s Ministry of Finance proposed a law requiring residents to file tax declarations for crypto purchases above $61,000. Previously, the Israeli defense minister reportedly authorized security forces to seize crypto accounts believed to be tied to the militant wing of Hamas.
Related:FATF includes DeFi in guidance for crypto service providers
In the meantime, Israel’s central bank has been experimenting with its own digital currency. As previously reported, the Bank of Israel issued a central bank digital currency through a pilot test of a digital shekel as of June 2021.
The United States government is offering rewards in cryptocurrency for information relating to the operations of enemy state-backed hackers or suspected terrorists.
The U.S. State Department’s new “Rewards for Justice” platform allows informants to submit anonymous tips and information in return for rewards in digital assets.
The platform was promoted at the Black Hat USA event — which ran from July 31 to August 5 in Las Vegas — with users able to submit tips via an unsecured Wi-Fi network called #Rewardsnotransoms. The open network was purposely set up to encourage attendees to log in and access the RFJ website, according to CNN.
Rewards of up to $10 million are being offered in exchange for info on various terrorist suspects, extremists, and state-sponsored hackers. Informants elect whether they wish to receive compensation in the form of crypto assets.
Informants provide sensitive information via a secure portal on the dark web — the layer of the internet that is not publicly accessed by commercial companies and search engines.
Former Director of the U.S. National Counterintelligence and Security Center, William Evanina, described the initiative as the U.S. government’s most public foray into crypto assets ever made.
Related:Don’t blame crypto for ransomware
Earlier this year, the Biden administration accused hackers employed by both Russia and China of breaching multiple U.S. government agencies and departments. In early June, U.S. officials recovered around $2.3 million in cryptocurrency used to pay a ransom following a cyber attack on the Colonial Pipeline system.
The RFJ program hopes to prevent these types of attacks by soliciting information from hackers with pertinent skills and expertise.
While the platform has already received tips, one State Department official emphasized that cyber-enforcement operations are “not a quick process.”
“We are receiving tips. We are evaluating tips. We’ll share those tips with the interagency partners. They must then use that information and reach out and begin their investigation,” they said.
Another official predicted the programme will comprise the precursor for similar cyber-policing initiatives in the future, stating:
“I think this offer of cryptocurrency is something that we will be using in the future for other types of rewards. It could encourage other types of sources to come to us with information who may not have wanted to come to us before.”
A U.S. Congress subcommittee is investigating if domestic extremists are turning to cryptocurrency as a source of funds for their activities.
On Feb. 25, the Subcommittee on National Security, International Development, and Monetary Policy will hold a hearing titled “Dollars Against Democracy: Domestic Terrorist Financing in the Aftermath of Insurrection.” A committee memorandum ahead of the hearing stated that “as scrutiny by traditional banks and payment platforms increases, extremists are turning to solicitations of cryptocurrencies.”
The memorandum lumps cryptocurrencies with other potential avenues for illicit activity financing including crowdfunding, charities, and social media platforms. Two main incidents are used to suggest crypto may have helped fund the Capitol insurrection.
Specifically, on Dec. 8 a French extremist who committed suicide sent 28.15 BTC (worth $522,000 at the time of transfer) to 22 addresses with many belonging to known far-right activists and internet personalities.
More than $250,000 of the BTC he sent went to activist Nick Fuentes who was identified as being at the Capitol during the insurrection, although he expressly denies entering the building.
The other source cited by the memorandum was a live video of the Capitol protest on the video streaming platform Dlive in which the streamer received approximately $222 in cryptocurrency tips. According to the document, the platform has paid out “hundreds of thousands of dollars to extremists since its founding.” The platform was purchased by peer-to-peer file sharing service BitTorrent, which is in turn owned by the Tron Foundation.
However the memo concedes the two incidents are circumstantial evidence and that “it is unknown whether the funds from these Bitcoin transfers or others were used in the planning and execution of the January 6th Trump rally or the Capitol insurrection that followed.”
The committee believes that as traditional finance ramps up the reporting of suspicious activity, future insurrectionists are likely to turn to non-traditional methods to finance their activities. It added that “some of the arrests related to the Jan. 6 attack,” were successful due to the reporting methods banks and other regulated financial institutes employ.
There is still significant push-back to the “cryptocurrency is a criminal’s haven” narrative.
Bitcoin influencer Pierre Rochard responded on Twitter to the memo saying “almost all domestic terrorism happened before Bitcoin was invented. Domestic terrorism is financed by USD.”
Cryptocurrency investor who goes by the title “The Crypto Monk” said that even Pokemon cards would be better for payment than Bitcoin due to the cryptocurrency’s ability to trace funds.
I’d literally rather accept Pokemon cards than a distributed ledger.
— The Crypto Monk ⛩️ (@thecryptomonk) February 23, 2021
United States Treasury Secretary Janet Yellen said yesterday that she sees the “promise” of cryptocurrency but also is wary of the reality that crypto is increasingly being leveraged to finance terrorism and launder funds.
Speaking at a financial sector innovation policy roundtable on Feb.10, Yellen said in her opening remarks:
“I see the promise of these new technologies, but I also see the reality: cryptocurrencies have been used to launder the profits of online drug traffickers; they’ve been a tool to finance terrorism.”
The former Federal Reserve Chair, Yellen has once again warned that cyberattacks and digital currency-related crimes were on the rise and maintains that while cryptocurrency has a lot of potential to revamp our financial system—crypto’s illicit use cases are a “growing concern.”
Yellen made reference to the Anti-Money Laundering Act passed into law by Congress last December that requires the U.S. government to update its anti-money laundering/countering the financing of terrorism (AML/CFT) laws—according to Yellen, the existing regulatory framework has not been updated much since its creation in the 1970s.
With the rise of digital assets and cyberfraud, the Treasury Secretary said:
“The update couldn’t have come at a better time. As this group knows very well, we’re living amidst an explosion of risk related to fraud, money laundering, terrorist financing, and data privacy.”
Yellen added that the United States Treasury Department, alongside regulatory agencies under its supervision, “can better stem the flow of dark money.”
Yellen added:
“And we’ll be better positioned to stop adversaries from hacking our institutions or interfering in our elections.”
Treasury Secretary Yellen’s latest comments on the use of crypto in illicit activities like money laundering and terror finance come after her initial warning from her Senate confirmation in mid-January.
Yellen initially said that the US needs to examine how it can curtail the use of crypto for illicit financing which she explained was its main use during her Senate confirmation hearing last week, She made the comments in response to a question from Sen. Maggie Hassan (D-NH) who asked about the potential for cryptocurrency to be leveraged in financing criminal and terrorist activities.
While it appeared that Yellen was destined to be another old-world cryptocurrency opponent, a written statement published on the Senate Finance Committee website on Jan 22, indicated that the incoming Secretary of the Treasure may have a more positive view on the potential for crypto to reshape the United States financial system.
In her statement, Yellen did again state the need for the US to confront the use of illicit activities leveraging crypto, this time she added that she also plans to encourage legitimate leveraging of digital assets.
The former Fed Chair wrote:
“I think it important we consider the benefits of cryptocurrencies and other digital assets, and the potential they have to improve the efficiency of the financial system.”
US Lawmakers Question Tron and DLive
Yellen’s new comments also come just days after two U.S. lawmakers published an open letter to Tron founder Justin Sun and DLive CEO Charles Wayn in the wake of the Capital riots—asking them to explain how they moderate extremist and white supremacist content.
The pair of U.S. lawmakers—who are part of the House Select Committee on Intelligence—published the open letter on The Verge on Tuesday and asked Sun and Wayn to explain how they plan to prevent extremist content from being broadcast on the crypto streaming platform in the wake of last month’s attempted insurrection in Washington at the confirmation of President Joe Biden.
The US representatives asked for Sun and Wayn to explain in detail how DLive, the decentralized video streaming alternative to YouTube, can protect younger users from extremist content and whether the company has any methods to identify bad actors financing extremist content.
A hearing will be held later this month by the House Financial Services Subcommittee on the financing of domestic terror following the Jan. 6. Insurrection on Capitol Hill where the discussion will likely focus on a $500,000 transaction in Bitcoin made by a French extremist and blogger to pay right-wing figures who appear to be heavily involved in the attack.
Cryptocurrencies used for illicit purposes are a “growing problem,” Treasury Secretary Janet Yellen said Wednesday.
“I see the promise of these new technologies, but I also see the reality: cryptocurrencies have been used to launder the profits of online drug traffickers; they’ve been a tool to finance terrorism,” she said in her opening remarks.
She referenced the Anti-Money Laundering Act passed into law by Congress last December, a part of the National Defense Authorization Act that requires the U.S. government to update its anti-money laundering/countering the financing of terrorism (AML/CFT) laws. Yellen said the existing regulatory framework was created in the 1970s and has not been updated much since.
“The update couldn’t have come at a better time. As this group knows very well, we’re living amidst an explosion of risk related to fraud, money laundering, terrorist financing, and data privacy,” she said.
This is the third time Yellen has spoken in public about crypto this year. During her confirmation hearing in January, she told the Senate Finance Committee that crypto use in terrorism was “a particular concern.” In later, written, remarks, she softened her tone, saying cryptocurrencies could be beneficial to the existing financial system as well.
Yellen’s remarks come a week after the United Nations (UN) published a report saying cryptocurrencies have been used to finance ISIS and Al-Qaeda.
That report referenced law enforcement actions in France and the U.S. Last September, French police arrested 29 individuals accused of facilitating a complicated scheme to fund terrorists using cryptocurrency coupons.
Earlier in the year, the U.S. Department of Justice announced it had dismantled three separate campaigns to finance Al-Qaeda, Hamas and ISIS that used cryptocurrencies.
U.S. lawmakers are also asking whether crypto streaming platform DLive, a subsidiary of BitTorrent and the Tron Foundation, was used to facilitate crypto donations to individuals present at the insurrection.
The Treasury Department, alongside regulatory agencies in its umbrella, “can better stem the flow of dark money,” Yellen said on Wednesday.
“And we’ll be better positioned to stop adversaries from hacking our institutions or interfering in our elections,” she added.
Former Federal Reserve Chair Janet Yellen highlighted the “growing concern” of crypto being leveraged to finance terror just weeks after the US Capitol came under attack from domestic terrorists.
President-elect Joe Biden has named former Fed Chair Janet Yellen to lead the United States Treasury Department when his administration formally takes office, which is expected to occur later today.
Yellen said that the United States needs to examine how it can curtail the use of crypto for illicit financing.
The former Fed Chair’s remarks come just two weeks after a mob of domestic terrorists stormed the US Capitol Hill building allegedly in an attempt to overturn the defeat of President Donald Trump in the recently concluded presidential elections.
While the mob allegedly stormed the Capitol building in an attempt to disrupt the Electoral college vote count by a joint session of Congress and prevent the formalization of president-elect Joe Biden’s election victory—new evidence has come to light indicating these violent protestors had been paid in Bitcoin.
Janet Yellen Concern Over Crypto Illicit Financing
The incoming Secretary of the Treasury, Yellen made the comments during her Senate confirmation hearing in response to a question from Sen. Maggie Hassan (D-NH) who asked about the potential for cryptocurrency to be leveraged in financing criminal and terrorist activities.
Yellen answered:
“The technologies to accomplish this change over time and we need to make sure that our methods for dealing with these matters, with tech terrorist financing, change along with changing technology, cryptocurrencies are a particular concern.”
The former Fed Chair added:
“I think many [cryptocurrencies] are used, at least in a transaction sense, mainly for illicit financing and I think we really need to examine ways in which we can curtail their use and make sure that anti-money laundering doesn’t occur through those channels.”
Attacks on the Capitol Paid in BTC
Investigations of the US Capitol Hill riot indicate that payments to the domestic terrorists were made in Bitcoin from a French donor who went by the pseudonym “pankkake”.
The BTC transferred to the violent protestors was worth over $500,000 (around 28.15 Bitcoins) and distributed to 22 different digital wallets. Most of the recipient addresses belonged to internet personalities and far-right activists, and the payments were made right before the storming of Capitol Hill.
A report reveals that the French donor left a suicide note a day after he transferred the donations to the right-wing activists and organizations. However, it is yet to be established if the French computer programmer is dead or still alive. The report shows that the mystery donor left the suicide note on a personal blog a day after he transferred the Bitcoin donations.
In the suicide note, “pankkake”, revealed that his health difficulties caused him to take such extreme actions. He further stated that he had “bequeathed [his] fortune to certain causes and certain people.” In other sections of his blog, the donor talked about the collapse of the “Western civilization,” that made him hate his heritage and ancestors. The anonymous donor wrote:
“I care about what happens after my death. That’s why I decided to leave my modest wealth to certain causes and people.”
Chainalysis blockchain and cryptocurrency analysis firm conducted investigations into the Bitcoin transfer and identified that Trump supporter and internet personality Nick Fuentes was the largest beneficiary of the donations. He obtained 13.5 Bitcoin worth around $250,000.
Chainalysis said that it cannot be determined for sure whether the funds from the French donor assisted in financing the US Capitol Hill riot. However, Acting US attorney, Michael Sherwin, stated that the investigation into the matter has so far rendered it as unprecedented, with prosecutors treating the case as a counterintelligence or counterterrorism investigation.
Last week, ECB President Christine Lagarde said that Bitcoin is a “funny business” asset that is used for money laundering and needs global regulation.
Christine Lagarde was unequivocal in her criticism. She stated:
“For those who had assumed it might turn into a currency — terribly sorry, but this is a highly speculative asset which has conducted some funny business and some interesting and totally reprehensible money-laundering activity.”
Despite the claims of Janet Yellen and ECB President Lagarde, a SWIFT report published last year in September entitled “Follow the Money” revealed that money laundering via cryptocurrencies is not a preferred tool for criminals.
The report highlighted that traditional methods like cash mules, cash businesses, and drug trade remain at the forefront of laundering activites, and criminals are still using cash over crypto in these activities at a ratio of 800:1.
The SWIFT report, however, did find that the use of cryptocurrency for laundering stolen bank funds will rise in the future and privacy coins and online marketplaces are an upcoming threat.
“Favorable factors include the growing number of altcoins (alternative cryptocurrencies) that have recently launched and which focus on providing full transaction anonymity,” it noted. However, private cryptocurrencies and online marketplaces are an upcoming threat.”
President-elect Joe Biden will officially take office tomorrow and Janet Yellen is anticipated to be the new United States Secretary of the Treasury.
