Circle Refutes False Claims on Illicit Financing

Circle Refutes False Claims on Illicit Financing

Policy

Circle Chief Strategy Officer and Head of Global Policy, Dante Disparte, wrote a formal letter to Senators Sherrod Brown and Elizabeth Warren in response to false claims from the so-called Campaign for Accountability.

 

Dear Chairman Brown and Senator Warren:

 

Circle recently became aware of a November 9, 2023 letter sent to you by the so-called Campaign for Accountability (“CfA”) regarding our firm.  The letter is replete with errors, omissions, and misleading information.  Let us be perfectly clear:  Circle does not facilitate, directly or indirectly, or finance Hamas (or any other illicit actors).  Nor does Circle bank Justin Sun.  Furthermore, Circle is subject to multiple regulatory regimes – including the Bank Secrecy Act (BSA) and applicable laws focused on anti-money laundering and countering the financing of terrorism – and has forcefully advocated for a comprehensive federal prudential regulatory regime in the United States.

 

First, Circle has long made combating illicit finance activities – including the use of currency in any form to fund terrorism – a guiding principle of our business.  Moreover, Circle has always been an active partner of regulators and law enforcement in the United States, Israel, and other jurisdictions to help ensure that our stablecoin, USDC, does not fund illicit activity of any kind.  We have a deep history of cooperating with law enforcement and, in the last month alone, were recognized by the U.S. Secret Service for prolonged support identifying instances of fraud and “pig-butchering” scams and assisting in the recovery of funds. 

 

In July 2023, the National Bureau for Counter Terror Financing of Israel issued an asset seizure order1 targeting the terror group Palestinian Islamic Jihad (“PIJ”) that identified wallet addresses containing $93 million of digital assets.  In support of its claims about PIJ financing, CfA relied upon a report and blog post prepared by the blockchain firm Elliptic2 on that seizure order that suggested that all $93 million in those wallets financed the group.  Both Elliptic and the Wall Street Journal3 self-corrected reports based on Elliptic’s analysis, noting that PIJ and Hezbollah “may have exchanged up to $12 million in crypto since 2021.”  Most importantly, public blockchain ledgers show that of the $93 million in digital assets wallets identified by the Israeli government, only $160 was transferred in USDC among those wallets, and none of that was acquired from Circle.4  It is both inaccurate and misleading for CfA to directly cite – without any corroboration or verification – posts on the social media site X asserting that Circle had financed major flows of funds to Hamas or Hezbollah.5

 

Second, Circle does not “bank” Justin Sun.  Neither Mr. Sun nor any entity owned or controlled by Mr. Sun, including the TRON Foundation or Huobi Global, currently have accounts with Circle.  To date, the U.S. government has not specifically designated Mr. Sun or his entities as Specially Designated Nationals.  Nonetheless, Circle terminated all accounts held by Mr. Sun and his affiliated companies in February 2023.

 

Third, Circle is a highly regulated financial services firm that devotes substantial resources to ensuring we are compliant with applicable rules and regulations.  We are regulated by the Ohio Department of Commerce Division of Financial Institutions as a Money Transmitter, the Massachusetts Division of Banks as a Foreign Transmittal Agency, and we hold both Virtual Currency and Money Transmitter Licenses issued by the New York Department of Financial Services and 45 other U.S. states and territories. Circle is also regulated as a Money Services Business with FinCEN; enforces without delay Office of Foreign Asset Control, U.K, EU, UN, and other sanctions regimes; and endeavors to comply with all court orders and other legal requirements.  In short, we are built on a culture of compliance and take our obligations seriously.  Indeed, this is par for the course for a number of Circle employees, who have spent large portions of their careers fighting crime and terrorism in roles at the Departments of Justice, Treasury, and Homeland Security, the CIA, FDIC, and CFTC, as staff of the White House and U.S. Senate, and as uniformed members of our armed forces.  

 

Finally, no other digital asset company has advocated more than Circle for a comprehensive federal framework to govern stablecoins.  Circle has consistently called for federal prudential regulation of stablecoins to ensure that every issuer must meet the highest reserving, redemption, disclosure, liquidity, and operational risk management standards.  In June 2023, Circle’s CEO, Jeremy Allaire, testified to Congress and asked that the United States adopt reserving standards that would make stablecoin issuers safer than banks, establish stronger consumer protections, and apply robust criminal penalties for non-compliant stablecoin issuers.6  Indeed, I echoed this call for regulatory action in my own testimony before your committee, as well as before Congress.7  Moreover, Circle supports Senator Warren’s and Senator Marshall’s recent amendment to the National Defense Authorization Act to strengthen AML provisions in the digital assets industry.  We also share broad agreement with Chairman Brown’s recent letter to U.S. regulators calling for a stronger disclosure regime in digital asset markets.  

 

We would be happy to discuss any of the above with you and your respective staff.  We look forward to continuing to work with you on ways to strengthen regulation in the digital assets space and to combat money laundering and the financing of terrorism more generally. 

 

Sincerely,


Dante Disparte

Chief Strategy Officer and Head of Public Policy   

 

1 National Bureau for Counter Terror Financing, “Administrative Order ASO - 34/23,” July 4, 2023, available at https://nbctf.mod.gov.il/he/Announcements/Documents/צת%2034-23.pdf.

2 On October 25, 2023, Elliptic clarified that with respect to the $93 million in Israeli-designated wallets, its research could not determine what portion of the funds received by those wallets are directly attributable to PIJ versus funds held by third parties like brokers or service providers used by PIJ. 

3 Wall Street Journal, Corrections & Amplifications to “Hamas Militants Behind Israel Attack Raised Millions in Crypto,” accessed November 10, 2023, https://www.wsj.com/world/middle-east/militants-behind-israel-attack-raised-millions-in-crypto-b9134b7a.

4 CfA chose to ignore those facts and instead referenced Circle in the same sentence as Tether, whose eponymous stablecoin, USDT, has been documented on public blockchain ledgers as being used for large quantities in illicit finance. See From Hamas to North Korean Nukes, Cryptocurrency Tether Keeps Showing Up, WSJ, Oct. 27, 2023. This attempt to muddy the waters between Circle and Tether is misleading and wrong. 

5 CfA,  November 9 letter, p. 2: “Multiple large flow addresses that have redeemed $USDC for USD (presumably through Circle’s bank accounts) have also received funds from wallets Israeli intelligence flagged as belonging to Hamas or Hezbollah.”

6 Jeremy AllaireTestimony, House Financial Services Committee (HFSC), June 13, 2023, available at https://docs.house.gov/meetings/BA/BA00/20230613/116085/HHRG-118-BA00-Wstate-AllaireJ-20230613.pdf.; see also Jeremy Allaire Testimony, HFSC, Dec. 8, 2021, available at https://www.congress.gov/117/meeting/house/114305/witnesses/HHRG-117-BA00-Wstate-AllaireJ-20211208.pdf.

7 Dante Disparte Testimony, HFSC, April 19, 2023, available at https://democrats-financialservices.house.gov/uploadedfiles/hhrg-118-ba21-wstate-disparted-20230419.pdf.



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