Crypto industry says it’s complying with Russian sanctions, like Elizabeth Warren, others are sounding the alarm

And they say authorities’ ability to track big transactions on the blockchain, the transparent digital ledger that underpins cryptocurrencies, makes it virtually impossible for Russia’s billionaire oligarchs to use it to move significant amounts of their money. wealth undetected.

“The scale of sanctions we’re seeing is so massive that there just isn’t the depth of crypto for the kinds of evasions we’re trying to prevent. What if an oligarch tries to move 10 billion dollars, it will be quite obvious and spotted by the people in the industry who run the on and off ramps,” said Jerry Brito, executive director of crypto think tank Coin Center. “It’s a fake -fleeing.”

Top Biden administration and Capitol Hill officials are unconvinced.

“I think that really underscores the need to have a strong regulatory regime that allows for appropriate activity but prevents inappropriate activity,” Federal Reserve Chairman Jerome H. Powell said in testimony Thursday before the Senate Banking Committee.

“We have laws on the books and stuff,” Powell said. “But for digital finance in general, we need a legal framework that would eliminate as much as possible the possibility that people could use unsecured cryptocurrencies as a means of evading the law or financing terrorism or hide their ill-gotten gains.”

Powell was responding to a question from Senate Intelligence Committee Chairman Mark R. Warner (D-Va.), who, along with three fellow Democrats, wrote to Treasury Secretary Janet L. Yellen on Wednesday asking what the department was doing to make sure the targeted Russians didn’t use crypto to circumvent the sanctions.

“Strict enforcement of sanctions compliance in the cryptocurrency industry is essential given that digital assets, which allow entities to circumvent the traditional financial system, can increasingly be used as a tool to evade penalties,” they wrote.

Yellen, in remarks on Wednesday after a speech in Chicago, called crypto a “channel to watch” and said the Treasury Department could fill the gaps the technology presents in its sanctions, according to at the Wall Street Journal. She added that many crypto participants already face anti-money laundering rules and penalties.

The United States imposed punitive sanctions on Russia intended to cripple the country economically for invading its neighbor. They include shutting down the Russian central bank and freezing its US assets; adding a number of major Russian banks and other companies to a sanctions list; closure of US airspace to Russian flights; working with European allies to disconnect the nation from the international financial network known as SWIFT, and personally target Russian President Vladimir Putin and his entourage.

The biggest crypto-trading platforms, including Coinbase and FTX, claim to comply with the sanctions and already follow the same requirements as traditional financial institutions to collect data on their customers and guard against suspicious activity.

The industry takes sanctions compliance “very seriously and uses a host of tools, including the use of blockchain analytics, trade monitoring and internet geolocation,” said Michelle Bond, CEO of the Association for Digital Asset Markets, an industry trade group. “We are entering an era where due diligence of the highest degree will be required and continued public-private information sharing will be essential.”

Major crypto exchanges have rejected a call by Ukrainian Deputy Prime Minister Mykhailo Fedorov to block all Russians from their platforms in order to “sabotage ordinary users”. Kraken, one of the major exchanges that rejected Federov’s request, said in a statement that “freezing access to digital assets for citizens of an entire country does not necessarily punish those who are truly responsible and who may already be prepared for the possibility of general sanctions”.

More than 17 million Russians, or about 12% of its total population, own cryptocurrency, according to TripleA, a Singapore-based crypto payments company. Adoption is even higher in Ukraine, where nearly 13% of the population, or more than 5.5 million people, own digital assets.

Demand for crypto has surged in both countries since the conflict broke out, with Ukrainians and Russians rushing to buy bitcoin and Tether, a so-called stablecoin whose price is pegged to the US dollar, the data shows. of Kaiko, one based in Paris. crypto-analytics company. The price of bitcoin has risen 18% over the past week.

Meanwhile, the Ukrainian government has collected over $42 million in crypto donations, some of which has already been converted into traditional currency to purchase essential supplies including drones, body armor and gasoline.

Crypto advocates point to this fundraising campaign as proof of crypto’s ability to advance a cause that has united much of the world. They aim to use it to argue that policymakers in Washington should exercise caution in drafting rules for the industry, even as they look for loopholes crypto might have in new sanctions.

“This, right now, is the fog of war. I think there are opportunities within crypto to evade sanctions,” said Adam Zarazinski, CEO of Inca Digital, a data company that works both with the crypto industry and government agencies “We don’t necessarily know what all of them are yet.”

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