US Treasury Deputy Secretary Adewale Adeyemo informed the Senate Banking, Housing, and Urban Affairs Committee on April 9 that Russia is increasingly turning to alternative payment methods, such as Tether's USDT stablecoin, to circumvent economic sanctions. This revelation comes amid growing concerns about illicit activities involving Tether's stablecoin, prompting joint investigations by the US and UK governments into crypto transactions exceeding $20 billion that may have violated Russian sanctions. Despite these challenges, Tether remains committed to compliance standards and collaboration with law enforcement to combat illicit financial activities.

Paul Grewal, Coinbase's Chief Legal Officer, advocated for stablecoin legislation as a means for the US government to address these issues, emphasizing the importance of centralizing dollar-denominated stablecoins within the US regulatory framework.

Adeyemo's testimony also highlighted how terrorist organizations like Al Qaeda and the Palestinian Islamic Jihad are leveraging advancements in cryptocurrency to evade traditional financial systems. He underscored the need for a robust enforcement regime to prevent illegal activities, especially as more terrorist groups and rogue states turn to digital assets.

To strengthen the government's ability to counter terrorist financing, the Treasury Department proposed three key reforms to the Committee. These reforms include implementing a secondary sanctions tool, modernizing existing authorities, and addressing jurisdictional risks associated with offshore digital asset platforms. Adeyemo emphasized the importance of these reforms in safeguarding national security and ensuring a level playing field for US-based Virtual Asset Service Providers (VASPs).

In conclusion, Adeyemo stressed the necessity of equipping US authorities with the tools and authorities needed to mitigate risks in the rapidly evolving digital asset ecosystem, particularly concerning dollar-based digital assets.