The U.S. Treasury is advocating for expanded authority to address the increasing misuse of cryptocurrencies by countries such as Iran, Russia, and North Korea.

In a report by Bloomberg, Deputy Secretary Adewale Adeyemo underscored in written testimony prior to a Senate hearing that the government is grappling with the complexities posed by nefarious actors who are continuously finding new methods to obscure their identities and transfer assets using virtual currencies.

Adeyemo highlighted the alarming trend of terrorist organizations and similar entities seeking alternative channels to move their funds in response to efforts aimed at curtailing their access to traditional financial systems. He specifically cited instances where Iran's Quds Force, a division of the Iranian military, has utilized cryptocurrencies to fund extremist groups like Hamas and the Palestinian Islamic Jihad in Gaza. Additionally, he noted that other state actors, including North Korea and Russia, have also turned to cryptocurrencies as a means to evade economic sanctions.

“A new secondary sanctions tool would help Treasury to evolve its targeting capabilities and would account for the technological changes that have rendered highly effective tools in traditional payments contexts less effective against virtual currencies.” - Adewale O. Adeyemo

Although details regarding this secondary sanctions tool are currently unclear, it is apparent that the U.S. Treasury intends to focus on foreign-based cryptocurrency exchanges that pose potential threats to national security while leveraging the U.S. financial system.

As previously reported U.S. authorities are investigating transactions exceeding $20 billion that flowed through the Russian-sanctioned cryptocurrency exchange Garantex. These transactions, facilitated using the Tether (USDT) stablecoin, have raised concerns regarding potential violations of sanctions against Russia.

However, it remains uncertain whether the U.S. Treasury plans to seek additional sanction powers to address the counterparties of Garantex.