A concerted effort is underway in the United States to crack down on the use of cryptocurrencies in the buying and selling of child sexual abuse material (CSAM), led by Senators Elizabeth Warren and Bill Cassidy.
The senators are asking federal agencies about their technical capabilities to combat crypto payments in the sale of child abuse material.
U.S. Senators Elizabeth Warren and Bill Cassidy are calling on the Justice Department and the Department of Homeland Security to step up efforts to combat the use of cryptocurrencies for payments in the distribution of child sexual abuse material (CSAM) online, citing the perceived escalation of the problem.
In a letter to Attorney General Merrick Garland and Secretary of Homeland Security Alejandro Mayorkas, the senators expressed concerns about the anonymity that cryptocurrency transactions provide. They claim that such anonymity makes it easier for those involved in CSAM trading to evade law enforcement .
Drawing on data from the U.S. Treasury’s Financial Crimes Enforcement Network, Chainalytic and the Internet Watch Foundation, the letter highlights the apparent increase in the use of cryptocurrency in illegal CSAM transactions.
It noted that financial institutions identified 1,800 Bitcoin wallets suspected of engaging in such transactions between 2020 and 2022. Chainalytic , however, observed a decline in the scale of the cryptocurrency-based CSAM market in 2023.
The senators highlighted the methods used by those involved in CSAM trading to conceal their activities, including the use of cryptocurrency mixing services and ATMs to hide the origin of funds.
Chainalytic ‘s study found that sellers of such materials use “mixers” and “privacy coins” such as Monero to launder profits and evade law enforcement scrutiny. In addition, instant exchangers facilitating Monero conversions have seen a significant increase in activity in recent years.
Warren and Cassidy noted the seriousness of the problem. They highlighted the prevalence of cryptocurrency as a preferred payment method for perpetrators of child abuse and sexual exploitation.
To expedite action, the senators asked the Department of Justice and DHS to release the results of a study on the extent of cryptocurrency’s role in the CSAM problem. They set a May 10 deadline for the agencies to respond.
Warren’s position on cryptocurrency regulation
Warren’s vociferous criticism of cryptocurrency, particularly regarding its potential involvement in illegal activities, has provoked negative reactions from some members of the cryptocurrency community.
However, her proposed anti-money laundering legislation in July 2023 was opposed by cryptocurrency advocacy groups, who argued that it could harm US start-ups and investors . Despite the opposition, Warren reiterated her belief that strict regulations are needed to prevent the criminal misuse of cryptocurrencies, including in CSAM-related cases.
The Justice Department’s current technical capabilities to investigate cryptocurrency transactions have already yielded results, as evidenced by the indictment of cryptocurrency exchange KuCoin and two of its founders.
on March 26, the Justice Department charged KuCoin and its founders with operating an unlicensed money transfer business and violating the Bank Secrecy Act. The indictment alleges that KuCoin facilitated the laundering of suspicious and criminal funds worth more than $5 billion.
The Justice Department stressed that KuCoin’s failure to implement basic anti-money laundering rules allowed it to operate in the shadows of the financial markets and serve as a haven for illegal money laundering activities.
