As Deputy Treasury Secretary Wally Adeyemo prepares to testify before the U.S. Senate Banking Committee on April 9, cryptocurrency and its role in illicit finance is set to take center stage

Recent​ ​​headlines have ​fueled ​concerns ​about ​Russia’s ​alleged ​use of ​crypto ​to ​evade sanctions ​and ​traffic ​arms​.

However, it is crucial to understand that the problem lies not with the technology but with the bad actors exploiting it. ​​

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• Crypto’s illicit finance problem stems from bad actors, not technology.

• There ​​is ​an ​urgent ​need ​for ​Congressional action ​​to regulate ​wayward ​corners ​of ​​the ​crypto industry​​​​​​.

• Passage of the Clarity for Payment Stablecoin Act is​ ​​crucial ​to asserting ​U​.​S​. ​leadership ​over ​digital ​dollars ​and ​combating ​financial ​crime​​​​​.

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Crypto’s Illicit Finance Problem: Stablecoins Under Scrutiny

The Misconception of “Crypto” as a Catchall Term

The media’s use of “crypto” as a catchall for the entire digital assets industry is misleading. 

Just like the banking sector, the crypto industry is not monolithic. 

Specific products, blockchains, or platforms like Tornado Cash or Terra-Luna often create a nexus of bad activity. 

Blaming the entire crypto industry for the misdeeds of individual entities is akin to holding all banks accountable for the actions of a single institution, such as Danske Banke, which pleaded guilty to $212 billion of Russia-linked money laundering in 2022.

The Need for Regulatory Action

Despite urgent calls for action from top U.S. policymakers and regulators, including Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell, the crypto industry in the U.S. has remained largely unregulated for more than five years.

This​​​ ​​lack ​of ​​regulation ​​threatens ​consumers​​, ​​markets​​​, ​​and national ​​​security​​. ​​​

​The ​Clarity ​​for ​​Payment ​​​Stablecoin ​Act​, ​​which ​​has ​been ​​under ​​development ​​for ​​two ​​years ​​and ​​has ​​been ​​approved ​​​by ​the ​House ​​Financial ​​​Services ​​Committee​​, ​is ​​an ​​important ​step ​​​in ​​addressing ​these ​​concerns​​​.​​​​​

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​​Asserting U.S. Leadership over Digital Dollars

The Clarity for Payment Stablecoin Act aims to establish a minimum standard for all payment stablecoin issuers to comply with U.S. anti-money laundering, counter-terrorist financing, and sanctions laws. 

This standard should apply to U.S. issuers of payment stablecoins and their international counterparts. 

Many of these issuers are licensed to offer dollar-denominated stablecoins from countries like the United Arab Emirates, Hong Kong, and Singapore. 

By enacting this bill, Senators and members of Congress can assert U.S. leadership over digital dollars worldwide, regardless of their form.

The Importance of Regulated Stablecoins

Circle, the issuer of the USDC stablecoin, is an example of how regulated stablecoins can effectively deter illicit activity. 

According to third-party reports, Circle has achieved a 99.95% rate of USDC being used for lawful purposes by abiding by laws, working with peer-regulated financial institutions, and upholding financial integrity. 

The crypto industry’s efforts to ensure broad conformity with the Travel Rule and adopting the TRUST Network by Coinbase and at least 58 other crypto companies demonstrate its commitment to combating illicit finance.

As Deputy Secretary Adeyemo prepares to address the complex threats against the U.S. economy and its global leadership, it is essential to recognize that the problem lies not with cryptocurrency technology but with the bad actors who exploit it. 

By passing clear laws for novel crypto markets, as with banking before it, the U.S. can​ ​​​​​preserve ​​​​​its ​​​leadership ​​​and ​modernize ​​​the ​​​global ​​​​financial ​​​​system​​​, ​​​making ​​​​​​​​​​​​​​​it ​​​​​​​​faster ​​​​​​​​​​​​​and ​​​​​fairer​​​​​​​​​. 

With over $150 billion in circulation, stablecoins are too important to ignore, and their potential to revolutionize the financial landscape should not be overshadowed by the actions of a few bad actors.