Hamas Financing Brings Regulator’s Attention to Cryptocurrency

Representatives of the Treasury Department and the CFTC said at a SIFMA conference that crypto is a general compliance issue, especially in money laundering and illicit finance.

The deputy secretary of the Treasury and the chair of the Commodity Futures Trading Commission both identified the “illicit financial use of digital assets” as a source of great concern, including as financing for Hamas. The remarks were made at a conference Tuesday, hosted by the Securities Industry and Financial Markets Association.

Deputy Secretary of the Treasury Wally Adeyemo said that cryptocurrencies are being used to finance Hamas and in a wide range of other illicit activity such as ransomware attacks. Adeyemo said Treasury will “take actions to go after that.”

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Specifically, he said the department would take actions against “mixers” in digital assets under the Patriot Act. Mixers are services that obfuscate crypto transactions and can disguise the true buyers and sellers of the assets. Section 311 of the Patriot Act gives the Department of the Treasury “a range of options that can be adapted to target specific money laundering and terrorist financing.” 

The Office of Foreign Asset Control, the part of the Treasury Department that enforces most economic sanctions, announced on October 18 that Buy Cash, a crypto exchange based in Gaza, is blocked from the U.S. financial system for facilitating small-dollar donations to Hamas.

CFTC Chair Rostin Benham, speaking at the same conference, also noted that “illicit financial activity” involving cryptocurrency also is a focus for the regulator, especially in light of “what’s going on geopolitically,” a clear reference to the war in Gaza and Israel.

Speaking of general crypto enforcement, Benham said that “49% of our total docket” in enforcement actions “were in the digital asset space.” Benham called this a “remarkable statistic” and argued that Congress needs to grant the CFTC “more authority to police these markets.”

Speaking of Bitcoin and Ether, the chairman said that, “under existing law, these digital assets are commodities.”

This remark is consistent with what Securities and Exchange Commission Chairman Gary Gensler has said, which is that every digital asset except Bitcoin and Ether are likely securities. Gensler has likewise been extremely critical of the digital asset industry and has characterized it as “rife with fraud and scams and hucksters” in Congressional testimony.

Benham added that “we need to be aggressive about policing it, and our enforcement docket proves that case.”

Money Markets Experience Highest 401(k) Investment Inflows in October

Alight Solutions’ 401(k) index also revealed 14 of the month’s 22 trading days favored fixed-income funds.


Investors moving assets within their 401(k) plans last month sought safety in fixed income amid stock market declines, according to the Alight Solutions 401(k) Index released Monday.

When tracking investment moves within its recordkeeper database, Alight found that traders favored fixed income on 14 of 22 trading days in October, with money market funds seeing the most inflows by far (56%), followed by international equity (13%) and company stock (12%).

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“We can’t say for certain why individuals make trades. However, we know from the 25-year history of the Alight 401(k) Index, that people tend to trade into fixed-income funds when stock prices fall,” Rob Austin, head of research at Alight Solutions, said via email. “With October’s S&P 500 returns in the red, it isn’t surprising to see money market funds receiving net inflows.”

Austin noted that, unlike other parts of the investment market, interest rates are not the most influential factor affecting how investments will start moving if rates are expected to hold, or even fall, in 2024.

“Alight’s 401(k) Index started in 1998 and, since that time, we have found that stock market returns tend to be a bigger predictor of trading activity than interest rate movement,” he said. “Specifically, trading activity spikes when indices like the S&P 500 and DJIA fall significantly in a day.”

In terms of outflows, target-date funds (57%), mid-cap U.S. equity (20%) and small-cap U.S. equity (13%) saw the most departures, Alight found. New contributions to equities decreased slightly to 68.8% in October from 68.9% in September.

“The 401(k) Index shows only trading activity and does not reflect money leaving plans, so this is money traded to other investments,” Austin stated. “Because target-date funds receive the lion’s share of new contributions (51%) and are the largest asset class in the index (31% of balances), it is ripe for money flowing out.”

Moreover, Austin said that due to automatic enrollment, many participants are defaulted into the target-date funds. When these people change their investments, the money will inherently come from TDFs.

Overall, October trading was light, with just one above-normal day, Alight found. A “normal” level of relative transfer activity is when the net daily movement of participants’ balances, as a percent of total 401(k) balances within the Alight Solutions 401(k) Index, equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.

A “high” relative transfer activity day is when the net daily movement exceeds two times the average daily net activity. A “moderate” relative transfer activity day is when the net daily movement is between 1.5 and 2 times the average daily net activity of the preceding 12 months.

Alight tracks 401(k) trading by following trading activity of the 401(k) plans it administers for several large employers, said Austin. This forms the basis for Alight’s 401(k) Index; the firm does not necessarily know when an individual has somebody else trading on their behalf.

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