May 04, 2023

At Hearing, Warren and Senior Intelligence Officials Confirm Crypto’s Threats to National Security

Warren Will Reintroduce Bipartisan Bill Cracking Down on Crypto National Security Risks

Directors of Defense Intelligence Agency and National Intelligence Highlight Crypto’s Use to Evade Sanctions, Fund Rogue States and Nuclear Weapons

Video of Hearing (YouTube) 

Washington, D.C. – At a hearing of the Senate Armed Services Committee, U.S. Senator Elizabeth Warren (D-Mass.) questioned senior intelligence officials about crypto’s threats to national security as the method of choice for countries to evade sanctions and fund weapons programs, support spying, and promote cyber attacks. 

In response to Senator Warren’s questions, Lieutenant General Scott Berrier, Director of the Defense Intelligence Agency, confirmed that North Korea’s laundering of billions in crypto to finance its nuclear weapons program and Iran’s use of Bitcoin mining to replace revenue lost to sanctions threatens national security.  In response to Senator Warren’s highlighting that Russia-affiliated ransomware gangs have used crypto ransoms to target American schools, hospitals, power stations, and businesses, Avril Haines, the Director of National Intelligence confirmed that “the vast majority of modern ransomware operators demand cryptocurrency.” 

Senator Warren announced the upcoming reintroduction of her and Senator Roger Marshall’s (R-Kan.) Digital Asset Anti-Money Laundering Act, bipartisan legislation that would mitigate the risks that cryptocurrency and other digital assets pose to the United States’s national security by closing loopholes in the existing anti-money laundering and countering of the financing of terrorism framework. The legislation would bring the digital asset ecosystem into greater compliance with the rules that govern the rest of the financial system. 

Transcript: To receive testimony on worldwide threats 
U.S. Senate Committee on Armed Services 
Thursday, May 4, 2023 

Senator Elizabeth Warren: So cryptocurrency is now the method of choice for countries to evade sanctions so that they can fund weapons programs, support spying, and promote cyber attacks. 

Crypto crime is hidden. But we know that in 2022 alone, there was over $20 billion in illicit transactions. We also know that Russia, Iran and North Korea moved around at least $8 billion using crypto. 

So let's focus for just a minute on North Korea. This one country stole a record breaking $1.7 billion. According to the UN Security Council, North Korea uses its crypto crime to fund its nuclear weapons development. 

General Berrier, you lead the Defense Intelligence Agency, which collects intel on foreign militaries, including on North Korea. When North Korea launders billions of dollars worth of crypto and funnels it into its nuclear program, does that threaten our national security?

Lieutenant General Scott Berrier, USA, Director of Defense Intelligence Agency: Certainly Senator, as North Korea steals that money and then tries to turn it into a legal tender, which at great cost, as you know. That is helping them build their nuclear capacity and that is a threat that we recognize.

Senator Warren: Thank you. So Director Haines, earlier this year, the U.S. intelligence community, which you lead, put out its annual threat assessment in which you identified North Korean cryptocurrency heists as part of, and I'm going to quote you here, “sophisticated and agile espionage, cybercrime, and attack threat.”

So let me ask you: does a sophisticated and agile espionage cybercrime and attack threat undermine our national security?

Avril Haines, Director of National Intelligence: Yes, absolutely. And just to pull it apart, to say that it's not just although obviously, the funding is critical. It's not just the funding of essentially nuclear programs that the DPRK may have involved in, but it's also posing a cyber threat to important networks. And that's part of what it is that we see as a national security threat.

Senator Warren: Thank you. So let's move to another example. A 2021 study found that nearly 5% of the world's Bitcoin mining takes place in Iran. The biggest crypto mine in the country is run by the Islamic Revolutionary Guard Corps and is backed by Chinese investment. 

How much sanctions evasion are we talking about here? Well, one crypto exchange alone, Binance, has processed $8 billion worth of Iranian transactions since 2018. 

So General Berrier, when the Islamic Revolutionary Guard Corps uses cryptomining to replace revenue that they lose through sanctions, does that threaten our national security?

Lieutenant General Berrier: Senator, I think it, it certainly threatens our U.S. forces in the region. Cryptocurrency, Bitcoin is one method of how they finance their, their operations. So I think it's certainly a component of that, yes. 

Senator Warren: Okay, thank you. And I'm going to do one more and get one more example in here. And that's Russia. Because Russia is ransomware central, the most prolific and dangerous ransomware gangs are thought to be run by criminals in Russia. Russia affiliated ransomware gangs have stolen from American schools, American hospitals, American power stations, and American businesses. 

Director Haines, do you know what portion of ransomware is paid in crypto?

Director Haines: So we assess that the vast majority of modern ransomware operators demand cryptocurrency, and when those demands aren't met, they probably, you know, are paid in that form. But part of the challenge for us in terms of identifying specifically how much is being used, you know, is using cryptocurrency, is that we just all ransomware incidents or payments aren't reported or documented–

Senator Warren: Fair enough, but when the HSGAC Committee, Homeland Security Committee, put out its report and said, basically, it's 100%. Does that sound about right to you? This is a business model built on crypto, is it not?

Avril Haines, Director of National Intelligence: Yeah, I mean, I the vast majority, I think over 90% is perfectly reasonable. 

Senator Warren: Okay, and then General Berrier, does the fact that ransomware gangs in Russia and around the world are using crypto to demand ransoms from American hospitals, and schools, and power stations, and businesses, does that threaten our national security?

Lieutenant General Berrier: I believe it does, Senator. Yes.

Senator Warren: I appreciate this. I appreciate your answers. You know, just think about what we're talking about here. North Korean nuclear weapons, Iranian sanctions, Russian ransomware, drug trafficking, human trafficking – some of the major threats to our national security are facilitated by crypto. 

And that is why Senator Roger Marshall and I will soon reintroduce our bill to crack down on illicit crypto activity. Our bill is not about SEC regulation or cracking down on crypto investor scams, although I think we need to do that. Our bill is about law enforcement and national security and keeping our country safe. Thank you, Mr. Chairman.