Testimony of Jonathan Levin
Chief Strategy Officer & Cofounder, Chainalysis
House Financial Services Committee
Digital Assets, Financial Technology and Inclusion Subcommittee
Crypto Crime in Context: Breaking Down the Illicit Activity in Digital Assets
November 15, 2023
Chairman Hill, Ranking Member Lynch, and members of the subcommittee:
My name is Jonathan Levin, one of the co-founders of Chainalysis, the leading blockchain
analysis company. I am grateful for the opportunity to testify to this committee, on thistopic, at this important time as the current issue at hand is particularly close to my heart.
The tragic events beginning on October 7, 2023 have shined a light on our core focus at
Chainalysis: detecting and disrupting bad actors that use cryptocurrencies for terrorism
financing and other illicit activity. We have spent almost a decade working with law
enforcement and intelligence agencies in the US, Israel, and allied countries around theworld to maximize disruption of these networks. After many joint successes, this has
marked the dawn of a new era of financial intelligence for governments around theworld.
On-Chain Detection of Illicit Activity
Financial intelligence has historically been composed of government collections andreporting from financial institutions. This is typically not real-time and highly dependenton domestic institutions to report on suspicious activity. Insight into finances of foreign
governments is often mired in complex international collaboration and information
sharing. Cryptocurrencies mark a departure from this where all governments can haveaccess to every transaction that has occurred and sharing of information allows for full
networks to be uncovered.

Chainalysis ■ 228 Park Ave S #23474 ■ New York, New York ■ 10003-1502

Cryptocurrency transactions are inherently public and the data from those transactions ispreserved on a transparent, immutable ledger. At Chainalysis, we analyze thetransaction data from blockchain networks in conjunction with open source intelligence
information and proprietary data to map the ecosystem of participants in thesenetworks. We then provide software solutions and investigative support to allow
investigators to trace the flow of transactions and identify potential illicit activity.
The process of identifying illicit activity on the blockchain involves two key components.
The first is quantifying the funds directly in the hands of an illicit actor such as a terrorist
organization, and the second is identifying the service providers that facilitate themovement of funds tied to that activity. When we look at known instances of terrorism
financing, service providers such as money services businesses are often involved. One
such service is the recently sanctioned “Buy Cash”, a Gaza-based business that provides
money transfer and virtual currency exchanges services. Some may do this in a way
which is similar to an over-the-counter broker, while others may be more similar tostreet-level businesses like hawalas. Identifying whether these entities are service
providers, or in fact controlling the terrorism-affiliated wallet is key, as is determining
which portion of the funds passing through the service provider relate to terrorism
financing.
Further details as to how these determinations are made, and the role of blockchain
analytics, crypto exchanges and law enforcement, can be found in our recent blog poston this topic.1
Disruption of Terrorist Financing Activities Using Cryptocurrencies
To that end, I wanted to offer some additional context on the use of cryptocurrencies tofinance Hamas and similar groups, and how that activity gets disrupted when law
enforcement can draw on Chainalysis and work with the industry. There is evidence ofterrorist organizations operating in Gaza attempting to raise funds using cryptocurrency

1

Chainalysis, “Correcting the Record: Inaccurate Methodologies for Estimating Cryptocurrency’s Role inTerrorism Financing,” (Oct. 18, 2023),
https://www.chainalysis.com/blog/cryptocurrency-terrorism-financing-accuracy-check/.
Chainalysis ■ 228 Park Ave S #23474 ■ New York, New York ■ 10003-1502

as early as 2016.2 These involve both those directly involved in terrorist organizations aswell as networks of enablers and facilitators who leverage otherwise legitimate
businesses, such as hawala services and OTC brokers, to move funds for thoseorganizations. Historically, this broader network of enablers has been particularly difficult
to detect and disrupt.
However, many of these donation campaigns have been disrupted, due largely to thegovernment’s new ability to detect this type of terror financing and the supporting
networks. For example, in August 2020, the DOJ announced that, with the aid ofChainalysis, it had dismantled terrorism financing campaigns by the military wing ofHamas, and by ISIS, and seized millions of dollars worth of funds.3 Similarly, in the past
two years, the Israeli government, again with support from Chainalysis, has undertaken
multiple successful seizures of cryptocurrency funds intended for groups supporting
Hamas, including Hezbollah and Iran’s Quds Force.4 In practice, this has meant working
in collaboration with the private sector to freeze both the accounts at crypto exchanges
and any other wallet addresses associated with terrorism financing. In each instance,international collaboration, as well as a trusted public-private partnership has been
essential.
In April 2023, Hamas publicly announced that it was shutting down its campaign toaccept cryptocurrency donations, citing successful government efforts to identify andprosecute donors.5 Despite their own acknowledgement of the transparency and,2

Chainalysis, “Terrorism Financing in Early Stages with Cryptocurrency But Advancing Quickly,” (Jan. 17,2020), https://www.chainalysis.com/blog/terrorism-financing-cryptocurrency-2019/.
3
Chainalysis, “Chainalysis in Action: Department of Justice Announces Takedown of Two Terrorism
Financing Campaigns with Help from Blockchain Analysis,” (Aug. 13, 2020),
https://www.chainalysis.com/blog/cryptocurrency-terrorism-financing-al-qaeda-al-qassam-brigades-bit
cointransfer/.
4
Chainalysis, “Israeli Government Seizes Cryptocurrency Addresses Associated with Hamas Donation
Campaigns,” (July 8, 2021),
https://www.chainalysis.com/blog/israel-hamas-cryptocurrency-seizure-july-2021/; Chainalysis,“Chainalysis In Action: Israeli Authorities Disrupt Hezbollah and Iran Quds Force Terrorism Financing
Crypto Infrastructure, Seize $1.7 Million in First,” (June 27, 2023),
https://www.chainalysis.com/blog/israel-nbctf-hezbollah-iran-quds-crypto-seizure/.
5
Chainalysis, "Hamas’ Al-Qassam Brigades Announces End of Cryptocurrency Donation Efforts,” (Apr.
27, 2023),
https://www.chainalysis.com/blog/hamas-al-qassam-brigades-cryptocurrency-donations-shutdown/.
Chainalysis ■ 228 Park Ave S #23474 ■ New York, New York ■ 10003-1502

therefore, inherent ineffectiveness of using cryptocurrency for terrorism finance, we haverefrained from taking a statement like that at face value and continue to work with law
enforcement to detect and disrupt terrorists’ use of cryptocurrency. Those investigations
are ongoing, as we partner with law enforcement to understand the extent of different
entities in their roles facilitating Hamas, their affiliates and enablers.
The Data on Illicit Activity
At Chainalysis, we regularly publish research based on our data to provide even more
context about the types and amounts of illicit activity involving cryptocurrencies.
As a general matter, our data indicates that the amount of illicit activity constitutes onlya small fraction of all cryptocurrency transaction activity.

In 2022, the amount of illicit activity involving cryptocurrencies was approximately $20.6
billion. The vast majority of that activity was attributable to ransomware, scams, andtheft. Terrorism finance only made up a very small portion of the total volume of illicit
activity.

Chainalysis ■ 228 Park Ave S #23474 ■ New York, New York ■ 10003-1502

Our annual Crypto Crime Report delves into each of these areas in more detail.6
Future Actions Necessary to Further Mitigate Illicit Activity
The reality is, though, that even more can be done.
First, the federal government should provide a path to compliance for the digital asset
industry in the US in order to increase the number of domestic touchpoints for US law
enforcement.7 That requires legislation to be passed quickly that subjects cryptocurrency
exchanges and stablecoin issuers to appropriate federal regulation.
Secondly, the ability to successfully conduct illicit transactions in cryptocurrency
generally involves the exploitation of gaps and weak points in the global ecosystem. Thisis best exemplified by the use of non-compliant exchanges in foreign jurisdictions
servicing bad actors. The US must continue to drive greater international collaboration to
tackle those illicit actors effectively.
Finally and perhaps most importantly, the US should prioritize arming government
agencies with sufficient resources and expertise to address the changing dynamics of
how value is being transferred over blockchains. Disrupting terrorist financing and illicit

6Chainalysis, “The 2023 Crypto Crime Report,” (Feb. 2023),
https://go.chainalysis.com/rs/503-FAP-074/images/Crypto_Crime_Report_2023.pdf.
7
Somensatto, Jason, “The U.S. Risks Its Position as a Stablecoin Leader,” CoinDesk (Oct. 23, 2023),
https://www.coindesk.com/consensus-magazine/2023/10/23/the-us-risks-its-position-as-a-stablecoin-leader/.
Chainalysis ■ 228 Park Ave S #23474 ■ New York, New York ■ 10003-1502

activity connected to cryptocurrency requires real time data, sophisticated technology
and cutting-edge expertise to exploit it. The government should also consider building
centers of expertise where data can be shared and closer public-private partnerships
can be built.
Thank you again for this opportunity. I look forward to answering any questions you may
have for me.

Chainalysis ■ 228 Park Ave S #23474 ■ New York, New York ■ 10003-1502