Sean Casten Asks Witness About Use Of 'Stablecoins' For Illicit Transactions

4/8/2025

During a House Financial Services Committee hearing last week, Rep. Sean Casten (D-IL) spoke about the use of 'stablecoins' for illicit purposes.

Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:

https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript

Stay Connected
Forbes on Facebook: http://fb.com/forbes
Forbes Video on Twitter: http://www.twitter.com/forbes
Forbes Video on Instagram: http://instagram.com/forbes
More From Forbes: http://forbes.com

Transcript

00:00Thanks, Ms. Kim. The gentleman from Illinois, Mr. Kasten, is now recognized for five minutes.

00:08Thank you, Mr. Chairman. Mr. McLaughlin, firstly, I just want to state the obvious.

00:14You currently have systems in place, right, to block, freeze, reject any transactions

00:18and report them to OFAC if they're done by shady characters, sanctions, evaders, child

00:22traffickers. Is that a broad yes? Yes, sir.

00:28Okay, I'm glad to hear it. You'd be in trouble if you say anything else.

00:33Tomorrow the committee is going to mark up stable coin legislation, which would include language

00:39to treat stable coin issuers as financial institutions under the Bank Secrecy Act, in which case they

00:45would also have to comply with anti-money laundering, know your customer rules, that you comply with

00:50as well. Is it your view that if that stable coin issuers should be subject to, you know,

00:58to those same rules that you comply with, regardless of how those rules may change, that the rules

01:02shouldn't be different from one financial institution to another?

01:05Thank you for your question. Yes, sir. I do believe any product, service, industry, or technology

01:13that is responsible for moving funds between customers or citizens has to be subject to regulation

01:20to make sure that they're protecting the customers or country.

01:25Okay. And since you've presumably got some experience, you know, filing SARS reports and what have you,

01:31can you speculate on what the bad guys would do if we had a stable coin regime where all of a sudden

01:37they weren't subject to the same rules that a depositor at your institution is subject to?

01:43Thank you again. I can speculate that the bad guys would become even more aggressive in the space,

01:51in terms of targeting vulnerable individuals to fraud, steal, and abuse the customers of the stable coin.

02:03Well, I certainly agree. I'm glad to hear you say it. And I raise that because some of my colleagues

02:08on the other side of the aisle believe that stable coin issuers should not have to comply with anti-money laundering rules.

02:14And I guess if you're here to represent our nation's child traffickers, that's a good position to have.

02:18But I think it's important that we make sure that we keep those protections.

02:21Ms. Coven, I want to move to you just to think about what might happen if we don't have those protections in place.

02:28My understanding from your 2020, from Jan Alice's 2025 crime report, is that stable coins account for 63%

02:35of all illicit transactions that you'd tracked, and that sanctioned entities are increasingly using stable coins

02:41because of the difficulty of using the US dollar. Do I have that basically right on what your 2025 report said?

02:48Yes, sir. Stable coins have become the currency of blockchains.

02:52They are by far the most transacted cryptocurrency today. And we support efforts to establish regulatory frameworks

03:00across stable coin issuers, robust, consistent standards across this growing market.

03:06But I appreciate that. But I just want to focus on the 63% of the illicit activity is done on stable coins.

03:13And I want to understand that number because my understanding of how what you can track is that you can't see the off-chain transactions.

03:20Right? Correct.

03:22So it's 63% of the stuff that's trackable. But presumably, if the bad guys know what's trackable,

03:29there might be some, it might be more than 63% if you could track everything.

03:33As an investigator, I, for me personally, it is a gift when illicit actors decide to dabble in stable coins

03:39because of the traceability and also seesability midstream.

03:43Yeah, I mean, it's sort of like, I love the guy who robs 7-11 without a mask and holds his ID up to the camera

03:48before he pulls the gun out, right? But presumably there's more there.

03:53Now, I say that because if I am a bad guy and we don't regulate stable coins, I can imagine a scenario

04:00where I go on to, you know, I buy some other kind of crypto. I use that to launder money.

04:05I then bring that onto an exchange that's issuing the stable coin, convert it to stable coin.

04:10Those are all off-chain transactions. So you wouldn't see any of that, right?

04:13If that was the means of money laundering?

04:17We've still had spectacular seizures, including a $225 million seizure of stable coins associated with the scam funds.

04:24So scammers know it's visible and traceable, but are still taking the risk to dabble in it.

04:28No, no, no. I'm not saying this to criticize Chainalysis. I'm just saying that because you're not tracking the off-chain,

04:33if I bought another crypto, went on to an exchange where the exchange was issuing this,

04:37because the exchanges run their own ledgers, right? And so that's, you don't see that stuff, right?

04:42And that's like, you know, I mean, you'd mentioned Garantex earlier, but my understanding is that, like,

04:46Garantex loves Tether because they can do all that sort of stuff and bypass the system.

04:52And even though we've, you know, hopefully we're clamping down on Garantex, you could still do that inside other exchanges

04:58and not track that, right?

05:00Absolutely. That's why regulatory frameworks that put standards on those cryptocurrency businesses

05:05to understand all this swapping that's going on are imperative.

05:08I really appreciate your expertise. I'm out of time. And just a marker for tomorrow.

05:13Let's make sure we don't make things easier for the bad guys. Yield back.

Sean Casten Asks Witness About Use Of 'Stablecoins' For Illicit Transactions

Category

Transcript

Recommended