WASHINGTON—The role of cryptocurrencies in illicit finance has come under renewed scrutiny after The Wall Street Journal’s report that Hamas and other militant groups used the technology to raise millions of dollars ahead of their recent attacks in Israel.

Some lawmakers responded by calling for tougher rules to curb crypto’s utility for criminals and groups under U.S. sanctions. Crypto firms say they work to keep such users off their platforms and argue that digital tokens can help law enforcement track bad actors.