Wall Street Breakfast: Crypto Crime

Crypto crime

Scrutiny is rising on the role of cryptocurrency in financing terror in the wake of the Oct. 7 attack by Hamas on Israel. In a speech set to be given in London this morning, U.S. Deputy Treasury Secretary Wally Adeyemo will warn crypto firms against allowing their platforms to be used to finance or support terrorist organizations, as geopolitical tensions heat up across the globe. Cryptocurrencies have also gone on a rip in recent weeks, with Bitcoin (BTC-USD) soaring a total of 30% to as high as $35,000, though many have attributed the big run-up to short squeezes and growing optimism for the approval of a spot ETF.

Quote: “There are those in the digital asset space who wish to innovate without regard to consequences instead of doing so responsibly, including protecting against illicit financing,” Adeyemo will say in his prepared remarks. “Let me be clear: We will use every tool available to go after any person or platform that is facilitating the movement of resources for terrorists. Our expectation is that financial institutions, digital asset companies and others in the virtual currency ecosystem will take steps to prevent terrorists from being able to access resources. If they do not act to prevent illicit financial flows, the United States and our partners will.”

Earlier this week, FinCEN released a bulletin outlining that Hamas raises funds to support its operations and members in a variety of ways, including “fundraising campaigns involving virtual currency and fictitious charities raising both fiat and virtual currency.” Over the past few weeks, the cyber branch of the Israeli Police has also frozen several crypto accounts belonging to Hamas, which sought to garner more funds on social media following its brutal assault. Decentralized finance (DeFi) had once touted the ability to send or receive funds without relying on intermediaries, but enforcement authorities might see a silver lining in being able to pinpoint transactions, addresses and wallets on a ledger that creates permanent public records.

Elsewhere: More U.S. Treasury officials are in Qatar this week to explore ways to crack down on international financial support for terrorist groups. U.S. forces have repeatedly come under fire in Iraq and Syria over the past two weeks, resulting in 19 troops being diagnosed with traumatic brain injuries, as well as the death of an American contractor who died of a heart attack while trying to shelter during a drone strike. In response, the U.S. launched airstrikes last night on two weapons and ammunition facilities in eastern Syria that were being used by Iranian-linked groups. (4 comments)

GDP reaction

The first reading of U.S. GDP for Q3 blew every analyst estimate out of the water, especially when most economists had expected the country to be mired in a recession by this time in 2023. The American economy expanded at an annualized rate of 4.9% to reflect the strongest quarter since Q4 2021, exceeding the +4.2% expected and powering up from the 2.1% advance in Q2. The increase was driven by strong consumer spending, among other variables, with many quick to comment on what the fresh data might mean for the Federal Reserve: “Based on this strong growth, another interest rate hike by year-end is a sure thing,” wrote SA Investing Group Leader Value Digger. “I think you’re getting ahead of yourself,” countered 2MuchDebt. “November Fed meeting is currently a 100% chance of no hike and December Fed meeting is currently a 75.5% chance of no hike according to Fed Fund futures.” (152 comments)

Speed bumps

After suspending operations in San Francisco, General Motors’ (GM) Cruise self-driving vehicle unit is pausing the operations of its entire autonomous vehicle network. Things started to spiral after the California DMV froze Cruise’s permits after an Oct. 2 incident in which one of the company’s AVs was involved in a hit-and-run. “The most important thing for us right now is to take steps to rebuild public trust,” Cruise said in a statement. “In that spirit, we have decided to proactively pause driverless operations while we take time to examine our processes, systems, and tools.” Besides San Fran, Cruise has operations in Austin, Dallas, Houston, Phoenix and Miami. (3 comments)

Prime earnings

Stock index futures were higher Friday as the broader market faces a second-straight down week, but the direction could change as the September core PCE price index arrives along with income and outlays. Helping boost sentiment following a mixed bag of tech earnings was Amazon (AMZN), which reported quarterly profits that tripled to nearly $10B. AMZN shares rose 5.3% AH on Thursday to $126 with cost cuts and strong sales brushing aside any concerns. Generative AI is also being seen as worth tens of billions of dollars in revenue, according to CEO Andy Jassy, who is “very optimistic about it.” (90 comments)