The Biden administration is calling on Congress to expand its regulatory authority over cryptocurrency to combat its potential use in financing terrorism, citing worries about groups like Hamas using digital assets for fundraising.

Deputy Treasury Secretary Wally Adeyemo emphasized the need for legislative actions to address the illicit financial use of cryptocurrencies.

He pointed to Hamas's October 7 attack on Israel as evidence of the increased focus on this issue.

While the Treasury Department has recently labeled international cryptocurrency mixers as money laundering hubs that enable terror funding, Adeyemo also urged the crypto industry to self-regulate to prevent its platforms from being exploited for unlawful purposes.

Cryptocurrency's Role in Terrorism Funding Under Scrutiny

The alleged involvement of cryptocurrencies in funding militant organisations, such as Hamas, has attracted considerable attention, especially after recent events in Israel.

Over 100 members of Congress have sought more information on this topic and potential legislative solutions. However, some within the crypto community argue that the connection between digital assets and terror financing is overstated.

Blockchain investigations specialist Elliptic, for instance, has reported no substantial evidence of Hamas benefiting significantly from crypto donations for its operations against Israel.

Read More: Chainalysis Latest Blog Post Questions Reports on Crypto's Role in Terrorism Financing

Balancing Regulation and Innovation

The calls for increased cryptocurrency regulation, primarily driven by concerns over terrorist funding, raise concerns about potentially stifling innovation and individual freedoms.

Overregulation could deter legitimate users, drive illicit activities underground, and impede the technology's capacity for positive change. Striking a balance between security and freedom is crucial to fully realize the potential of cryptocurrencies.