But here’s the problem. While Congress hastened to create a regulatory framework for the cryptocurrency market, it has left unresolved obvious loopholes that criminals are already exploiting to move and hide dirty money. If Congress doesn’t bridge these gaps now, it will not only set the rules for fast-moving markets, it will also write the next chapter in how dirty money moves around the world.
I work for Transparency International US. Transparency International US is a nonprofit organization that is part of the world’s oldest and largest anti-corruption network. We spend a lot of time tracking how corrupt officials steal from the public, move that money around the world, and hide it. In many real-world cases, cryptocurrencies are already part of that strategy.
About the author
Scott Greytak is Deputy Executive Director of Transparency International US, where he works with a global network to fight corruption and illicit finance. He has played a central role in promoting and defending major anti-corruption laws and democratic reforms in the United States.
Let’s take Venezuela as an example. With U.S. sanctions restricting oil revenues and access to the traditional financial system, regime insiders and their partners have increasingly turned to digital versions of the dollar to move funds across borders and pay for goods when banks are blocked from processing transactions. These digital dollars can move quickly and around the world, often without banks or other gatekeepers in between, and can be difficult to stop in real time, even when the activity is clearly tied to people the United States is sanctioning.
And it’s not just Venezuela. Iran, Russia, and North Korea have all used cryptocurrencies in various ways to move funds, evade sanctions, or finance state activities under pressure from traditional financial systems.
This is not a question of whether cryptocurrencies are good or bad. The question is whether Congress is going to pass a law that gives criminals access from day one. There are four things that could happen if lawmakers aren’t careful.
First, some cryptocurrency companies already handle people’s money in a way that is written according to existing rules, but they do not follow those rules. They hold customer funds. They move money. Facilitates buying and selling. And they get a cut. But some proposals being considered by Congress would allow companies to bypass basic security measures simply by claiming that because the system is “decentralized,” “no one is actually responsible.” It’s like having online car and home lenders ignore consumer protections by claiming they’re “just an app.” When dealing with people’s money, basic rules should be applied to prevent fraud and dirty money. Rules should follow functionality, not labels.
Second, sanctions are one of the most powerful tools the United States has to separate criminals from funds, including corrupt governments, drug cartels, and terrorists. But some crypto tools are designed in such a way that once activated, they can’t call anyone or block anything, even when clearly dirty money is flowing through them. That’s no excuse. A rule that applies when humans move money but disappears when software does the same thing is not a rule at all. That’s a loophole. Congress needs to be clear: Sanctions still apply when cryptographic tools are used to move money.
Third, Congress has already taken initial steps to regulate digital dollars, primarily focusing on the companies that issue them. That was the beginning. But these rules primarily target the moment a digital dollar is created, rather than what happens after it goes into circulation. As these financial instruments move from person to person, across borders, and through multiple hands, many of the safeguards that apply to traditional money are lost. When something functions like money, basic protection must accompany it wherever it goes. As of now, that’s not the case. And whenever money can move freely without oversight, criminals are the first to take advantage of it.
Finally, Congress should not allow companies to circumvent the rules simply by saying they are based elsewhere. Some proposals risk allowing crypto businesses to provide services to Americans while claiming that they do not have to comply with U.S. laws because their offices and infrastructure are located overseas. This is exactly the opening that criminals are looking for. When the rules stop at borders but the money doesn’t, those trying to hide dirty money have an advantage. The solution is simple. When we do business with U.S. customers or conduct U.S. business transactions, we are subject to U.S. rules.
These are fundamental principles that have worked across our financial system for decades. In any case, encryption rules come into play. The real question is whether those rules make crime harder or easier. Rushing to implement laws with exploitable gaps all but guarantees years of cleanup after the damage has already been done. If these gaps are not fixed now, their effects could surface sooner and more clearly than Congress anticipated.
