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US authorities are stepping up their clampdown on cryptocurrency markets with new rules on opaque transactions, as pressure grows in Washington to curb links between digital tokens and illicit financing following Hamas’s attack on Israel.

The Treasury department said late on Thursday it planned to force more transparency on trades that pass through so-called crypto-mixing services, to combat what it called an “acute money laundering and national security risk”. Mixers obscure the trail of crypto ownership and payments.

The move comes days after a bipartisan group of senators in Washington called on the Biden administration to curb illicit crypto activity that could be used to evade US sanctions and finance militant groups. Politicians have renewed their focus on potential links between cryptocurrencies and illicit financing following Hamas’s attack on Israel earlier this month.

Israeli authorities have closed down more than 100 accounts on Binance, the world’s largest cryptocurrency exchange, that Israel suspects of being linked with Hamas. It has also focused on more than 150 online donation initiatives in support of Hamas, the Palestinian Islamic Jihad and other groups, the Financial Times previously reported.

“More broadly, the Treasury department is aggressively combating illicit use of all aspects of the [crypto-mixing] ecosystem by terrorist groups, including Hamas and Palestinian Islamic Jihad,” said Wally Adeyemo, deputy secretary of the Treasury.

Analysis in August by Elliptic, a crypto analytics group, found that crypto wallets associated with multiple suspicious Middle Eastern groups had historically relied on the same crypto exchange platforms to try to convert their crypto into sovereign currencies.

FinCEN, the US financial crime watchdog, said it wanted to force financial institutions to report information about transactions when they “know, suspect, or have reason to suspect” they involve exposure to a crypto-mixing service within or beyond the jurisdiction of the US.

“Just as with our efforts in the traditional financial system, [the] Treasury will work to identify and root out the illicit use and abuse of the [crypto-mixing] ecosystem,” said Andrea Gacki, director of FinCEN.

In recent years, the US has targeted crypto-mixing services because they blend payments that can normally be traced on the digital ledgers that underlie cryptocurrencies.

Last year, the Office of Foreign Assets Control (Ofac), the Treasury division that enforces economic sanctions, targeted two mixing services, and Tornado Cash, alleging they had helped North Korea-backed hackers launder more than $7bn from cyber heists.

In January, it publicly identified Bitzlato, a Russian-based cryptocurrency service it suspected had transmitted millions of illicit crypto funds in violation of US money-laundering regulations.

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