Senator Elizabeth Warren has called on the U.S. Department of the Treasury and the Department of Justice to disclose whether they are investigating national security threats posed by decentralized cryptocurrency exchanges. In a letter addressed to Treasury Secretary Scott Bessent and Attorney General Pamela Bondi, the Massachusetts senator cited growing concerns over PancakeSwap, a decentralized exchange that she said may have facilitated money laundering operations linked to North Korea.
Warren’s inquiry into PancakeSwap and political influence concerns
In the letter dated December 15, Warren requested responses from both agencies by January 12, 2026. She asked whether the departments are “investigating significant national security risks posed by decentralized cryptocurrency exchanges like PancakeSwap.”
The senator noted reports that the platform has been used to “help launder the cybercrime proceeds and huge sums of money for North Korea.” She also raised concerns about “improper political influence by the Trump Administration on enforcement decisions” due to PancakeSwap’s association with tokens connected to World Liberty Financial, a firm reportedly linked to the Trump family.
“The Wall Street Journal reports that ‘[o]ver 90% of [World Liberty’s flagship coin] USD1 trades have taken place on PancakeSwap,’” Warren’s letter said, referring to an August 2025 article by The Wall Street Journal.
She added that understanding whether the federal agencies are monitoring these developments is necessary as Congress debates new crypto market structure legislation.
“As Congress considers crypto market structure legislation, including rules to prevent terrorists, criminals, and rogue states from exploiting decentralized finance (DeFi) to fund their activities, it is critical to understand whether you are seriously investigating these risks,” Warren wrote.
Treasury warned of DeFi’s money laundering vulnerabilities
Warren referenced Treasury’s past findings about the vulnerabilities of decentralized exchanges. The 2023 Illicit Finance Risk Assessment of Decentralized Finance concluded that DeFi services often operate without implementing anti-money laundering (AML) or counter-financing of terrorism (CFT) controls. The report said this gap “creates a dangerous misperception that decentralized services can ignore anti-money laundering safeguards.”
PancakeSwap’s own documentation promotes its “no registration or account needed” model, allowing users to instantly trade tokens through automated smart contracts. Critics argue that this framework enables criminals to move funds anonymously, bypassing “know your customer” (KYC) requirements followed by regulated financial institutions.
The letter cited data from TRM Labs and Allium, which traced $263 million in stolen funds from North Korean Lazarus Group operations through PancakeSwap and other DeFi protocols. TRM Labs described the exchange as part of “the laundering process [that] relied heavily on decentralized finance (DeFi) tools, particularly decentralized exchanges (DEXs) and cross-chain bridges.”
“Perfect off ramp for criminals,” experts warn
Warren’s letter quoted research calling decentralized exchanges “the perfect off ramp for criminals” because they allow actors to “convert ill-gotten gains into cash that can be spent in the real world…with minimal verification and KYC controls.” Analysts from TRM Labs and academic studies have shown that over “384,000 scammer addresses…on Uniswap…and PancakeSwap” conducted fraudulent transactions through these systems.
Such activity has also been linked to international money laundering networks. Reports from WIRED and HodlFM previously highlighted that stolen FTX funds and isolated hack proceeds had moved through decentralized exchanges without detection.
The Chainalysis 2025 Crypto Crime Report described illicit crypto usage as “increasingly diverse and professionalized,” finding that malicious actors “launder stolen funds by funneling them through decentralized exchanges (DEXs), mining services, or mixing services to obfuscate the transaction trail.”
According to Elliptic, the pattern has evolved significantly:
“In 2018, money laundering using cryptoassets…occurred almost entirely using Bitcoin,” but now “illicit activity in cryptoassets involves sophisticated actors” who operate across DeFi ecosystems and use stablecoins to hide funds.
National security and legislative implications
Warren asked Bessent and Bondi to clarify three key points: the extent of national security risks tied to PancakeSwap and similar exchanges; current regulatory gaps that allow DeFi misuse; and measures that ensure enforcement decisions remain free from potential political influence.
“Without regulatory monitoring, illicit actors will increasingly be able to acquire crypto assets on decentralized exchanges and then facilitate financial transactions without having to cash out through institutions that could have monitored and reported suspicious activity,” Warren warned.
The senator’s letter comes as the Senate Banking Committee, where she serves as Ranking Member, has delayed consideration of the Responsible Financial Innovation Act and other digital market structure proposals until 2026. Chair Tim Scott confirmed the postponement earlier this month.
Warren’s demand for transparency adds pressure on federal agencies as policymakers debate how to reconcile innovation in DeFi with oversight responsibilities aimed at safeguarding national security and consumer protection.
Gunel Ismayilova
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