Adeyemo highlighted the importance of strengthening the Treasury's ability to apply secondary sanctions, particularly aimed at providers of digital assets.

Undersecretary of the U.S. Treasury Wally Adeyemo warned that Russia is turning to alternative payment methods like the stablecoin Tether (USDT) to circumvent sanctions and continue funding military operations.

During the hearing titled “Countering Illicit Finance, Terrorism, and Sanctions Evasion,” which is the second discussion on this topic in the past six months, Adeyemo emphasized the growing trend of Russia utilizing stablecoins such as Tether to evade sanctions, posing challenges to the effectiveness of these economic restrictions.

Adeyemo emphasized that while progress has been made in combating illicit finance, more needs to be done to counteract bad actors who exploit cryptocurrencies for illicit financial activities. He called for additional tools focused on digital asset providers within the Treasury to address these challenges effectively and urged Congress to pass legislation expanding the agency's authority to regulate key players in the digital asset space.

The hearing witnessed discussions outlining the widespread misuse of cryptocurrency by various criminal networks beyond terrorist groups to launder funds, including North Korean ransomware syndicates, narcotics traffickers, and perpetrators of child sexual exploitation using digital assets for money laundering.

There was some disagreement among committee members regarding the emphasis on cryptocurrencies in combating illicit financial activities. Senator Tim Scott criticized the singular focus on digital assets, accusing the administration of using them as a distraction from broader issues related to illicit financing.

In response to concerns about Russian actors exploiting cryptocurrencies, bipartisan bills such as the Digital Asset Anti-Money Laundering Act of 2023 and the Crypto Asset National Security Enhancement Act of 2023 were introduced last year to regulate various crypto participants. However, these bills are still in the committee markup phase without further progress.