Andy Kim Asks Witness About Use Of Cryptocurrency Anonymization Tools To Facilitate Illicit Trading

6 months ago

During a Senate Banking Committee hearing on Wednesday, Sen. Andy Kim (D-NJ) spoke about the use of anonymization tools to facilitate illicit financing.

Transcript

00:00Thank you, Senator Kim.

00:01Yeah, thank you, Chairman.

00:02Mr. Levin, I'd like to just start with you.

00:04You know, I had gone through the Chain Analysis 2025 Crypto Crime Report.

00:09First of all, thank you for that type of detail.

00:11But I wanted to ask you if you could elaborate on the role of mixers,

00:16other types of smart contracts, other types of anonymization tools

00:20in terms of facilitating illicit finance, illicit trading.

00:26Thank you, Senator, and appreciate you taking the time to read the report.

00:30We at Chain Analysis track the different types of anonymizing techniques

00:34used by illicit actors to thwart law enforcement actually being able to get after them.

00:42And actually, we have seen that mixers are used by illicit actors

00:49to cover their tracks in terms of laundering proceeds of crime.

00:53But there is also another side of this,

00:55which is it's possible to continue to trace through certain types of mixers in certain instances.

01:02And we've seen law enforcement be successful in those regards.

01:05I would say that it is important, as the committee thinks about regulating this space,

01:11to look at what are the residual risks that are there given all of the tools

01:16in the disposal of law enforcement and all of the authorities

01:19that intelligence and law enforcement has in this domain.

01:23I just want to make sure that I'm building this out right.

01:26So, you know, for instance, you talked about in your hearing, in your testimony,

01:31that public ledgers underpin most digital asset activity allows for visibility,

01:36a certain amount of transparency.

01:37But, you know, am I right that these anonymization tools are ones that obfuscate,

01:42that make it more difficult to be able to track?

01:44Yes, Senator, it is correct that the majority of activity on these ledgers is transparent

01:51and you can see which entities are involved.

01:56And Chainalysis provides the unique intelligence about whether it is a mixer that is transacting

02:01or whether that is a centralized exchange.

02:04And so it is possible to identify that activity.

02:07It is also possible in certain instances to actually be able to trace through those mixers

02:12and continue the hunt for a law enforcement agent.

02:15I understand that in terms of the analysis to be able to track,

02:18but it does do a lot of that after the fact, after the transactions have already occurred,

02:24which makes it very difficult to be able to try to actually intervene,

02:27to be able to prevent these transactions from occurring.

02:30But I don't discount the fact that it's certainly helpful,

02:33especially when it comes to writing SAR reports or other things afterwards.

02:36Who are some of the actors that we're talking about here?

02:39I mean, we're talking about countries like North Korea and Iran.

02:42Is that right?

02:43Yes, Senator.

02:44Really, any illicit actor that is using cryptocurrency can use any type of service.

02:50And we've seen DPRK and we've seen Iran use mixers.

02:54We also see different terrorist groups.

02:56Is that correct?

02:57Yeah.

02:57In general, we have seen that terrorist organizations actually use very convenient technologies

03:03to be able to fundraise or pay people.

03:06And so, you know, we have seen less use of mixers in the context of terrorist financing

03:11actually than you would expect.

03:13So terrorist groups still utilizing crypto in different ways,

03:16as well as, you know, cartels and other organizations like that.

03:20Is that right?

03:21Senator, the illicit actors globally use the same technologies,

03:27the same services that all of us who use cryptocurrencies use,

03:31which is, you know, any type of instrument in cryptocurrencies.

03:35Mr. Garlinghouse, I'd like to just kind of turn to you.

03:38I mean, I just wanted to just get your thoughts on this.

03:40I mean, do you acknowledge what Mr. Levin's saying in terms of the illicit actors,

03:46the bad actors being able to utilize crypto right now?

03:49And, you know, I certainly appreciate the efforts that your company has made in terms of AML,

03:53but, you know, we're still seeing these problems.

03:56Is that something that you see and recognize as well?

03:59Ripple has always been a compliance first company.

04:01And as I said in my early testimony, we have over 60 licenses around the world.

04:05That being said, I think anytime you see bad actors, they're looking for, as Mr. Levin said,

04:11whatever the easiest path is.

04:12They use cash.

04:14They use other assets.

04:15I've even read about them using gold.

04:18Yeah.

04:18So certainly they're also experimenting and trying to use digital assets.

04:25I think the good news has been in many cases,

04:27they don't often understand how traceable and trackable that actually is.

04:31And it's more trackable than obviously cash.

04:34Yeah, but we're still seeing the anonymization tools being utilized.

04:38And again, a lot of that is after the fact.

04:40The difficulty, I mean, we saw North Korea right in front of the world be able to hack and take billions of dollars.

04:47We can see them moving around, but we had difficulty to be able to actually intervene.

04:50I don't discount the fact that we're never going to be able to stop it all.

04:54We can't stop it with cash.

04:56I think the problem that I see is that I used to work on counter-terrorist financing,

05:00and the sheer scale of this is enormous.

05:03You know, it's just, it's an industrialization of North Korea's ability.

05:06They don't need to counterfeit anymore.

05:07They're finding ways to be able to do this.

05:09So I just hope that, you know, we can work together with the industry,

05:12because I believe that industry doesn't want to have crypto be able to be utilized in this way.

05:17I worry about the trajectory, what it might do to evade sanctions and other types of efforts.

05:22And, you know, this is something that, you know, I hope that we can address,

05:25especially when we're talking about over $50 billion just last year being used for illicit actors in this space.

05:32So I hope that this is something we can build off from.

05:33We had some efforts in this in a bipartisan way in the Genius Act.

05:37And, you know, I hope that we can make this a priority to make sure that we're trying to stop the terrorist groups,

05:42the cartels that we have talked about standing up against in so many different ways.

05:47And with that, I'll yield back.

Andy Kim Asks Witness About Use Of Cryptocurrency Anonymization Tools To Facilitate Illicit Trading

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