Warren Calls for Treasury and Department of Justice to Investigate How Illicit Actors Are Exploiting Decentralized Finance Services to Threaten National Security
“As Congress considers crypto market structure legislation—including rules to prevent terrorists, criminals, and rogue states from exploiting decentralized finance (DeFi) to fund their activities—it is critical to understand whether you are seriously investigating these risks.”
Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, sent a letter to Treasury Secretary Scott Bessent and Attorney General Pamela Bondi calling for their agencies to investigate the national security risks posed by decentralized cryptocurrency exchanges, including PancakeSwap.
“I am especially concerned about any improper political influence by the Trump Administration on enforcement decisions, because PancakeSwap has reportedly been ‘drumming up interest among traders to use coins issued by the Trump family’s main crypto company, World Liberty Financial,’” wrote Ranking Member Warren. “As Congress considers crypto market structure legislation—including rules to prevent terrorists, criminals, and rogue states from exploiting decentralized finance (DeFi) to fund their activities—it is critical to understand whether you are seriously investigating these risks.”
The Ranking Member raised concerns on how DeFi exchange platforms lack national security safeguards: “Exchange platforms like PancakeSwap and Uniswap facilitate hundreds of millions of dollars in transactions per day and do not require users to register or show any form of identification to trade. These lax requirements permit users to bypass the ‘know your customer’ (KYC) rules that other types of financial institutions are required to follow.”
She continued: “Without anti-money laundering program controls, including but not limited to KYC, bad actors are able to exploit decentralized platforms to move, mix, and cash out illicit funds. For example, North Korean hackers used PancakeSwap to facilitate the laundering of an estimated $263 million of the $1.46 billion they stole in what has been described as the ‘largest crypto theft of all time.’”
She also expressed concerns about how criminals could exploit DeFi exchanges to fund their illicit activities: “Decentralized exchanges like PancakeSwap have been described as the ‘Perfect Off Ramp for Criminals,’ given that they can enable criminals to ‘convert ill-gotten gains into cash that can be spent in the real world . . . with minimal verification and KYC controls…’ Without regulatory monitoring, illicit actors will increasingly be able to acquire crypto assets on decentralized exchanges, and then facilitate financial transactions without having to cash out through institutions that could otherwise have monitored and reported suspicious activity to law enforcement.”
She concluded by requesting answers to her questions on the national security risks posed by decentralized exchanges no later than January 12, 2025.
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