Senator Asks If Russia Could Use Cryptocurrencies to Enforce Sanctions

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Senator Asks If Russia Could Use Cryptocurrencies to Enforce Sanctions

Four US senators want Treasury Secretary Janet L. Yellen will explain how his department plans to get cryptocurrency companies and other digital-asset intermediaries into implementing economic sanctions against Russia.

In a letter on Wednesday, four Democrats — Elizabeth Warren of Massachusetts, Mark Warner of Virginia, Sherrod Brown of Ohio and Jack Reed of Rhode Island — also asked whether decentralized financial structures that operate without any middlemen would enforce the ban. There were obstacles to do.

“Given the need to ensure the efficacy and integrity of our sanctions program against Russia and other adversaries, we are seeking information on the steps being taken by the Treasury to enforce compliance with the sanctions by the cryptocurrency industry,” the lawmakers said. wrote, all members of the Senate Banking Committee.

In response to Russia’s military attack on Ukraine, Western countries and global companies such as Apple, BP and Shell have imposed a number of sanctions. Some Russian banks have been blocked from SWIFT, the communication system that facilitates cross-border bank transfers, and transactions with Russia’s central bank have also been halted.

But there is growing concern that Russia may turn to digital assets such as cryptocurrencies or its own digital ruble to ease the pressure of these sanctions. A 2021 Treasury report highlighted the expansion of the digital asset marketplace as a potential problem for governments hoping to change the behavior of rogue countries by penalizing them financially. And last week, The New York Times described a number of cryptocurrency tools available to Russian entities that want to continue making deals without engaging the traditional banking industry.

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“These reports are even more disturbing as the analysis shows that the cryptocurrency industry may not fulfill its responsibility to comply with US sanctions,” the senators wrote.

Cryptocurrency linked to the ruble is in business jump According to crypto tracking firms Chainalysis and Kaiko, the United States and several of its allies have imposed sanctions. But the significance of the increase is unclear: it may suggest that affected Russian entities are converting money into cryptocurrency, but it is also possible that the general Russian ruble may turn to technology to preserve their savings as value. are turning.

Major crypto exchanges including Binance and FTX have pledged to comply with US sanctions, but the industry has resisted Call From the Ukrainian government to freeze all Russians’ access to cryptocurrency. The US has not asked companies to take such action.

“Our mission is better served by focusing on individual needs above any government or political faction,” said Jesse Powell, chief executive of crypto exchange Kraken. wrote on Twitter this week. Cryptocurrencies are “a weapon for peace, not for war,” he said.

Experts warn that Russia is preparing to counter the effects of sanctions by developing new tools to hide the source of crypto trades. He added that state-backed hackers can also take digital assets hostage to make up for lost revenue.

But industry executives have argued That such concerns may be partly allayed, as law enforcement agents have shown an increasing ability to track transactions on the blockchain, the public ledger that underpins cryptocurrency. They also point out that crypto markets are small and expensive to use, which would make it difficult for Russia to use crypto to get around sanctions aimed at destabilizing the entire economy.

“The inherent features of crypto – transparency, immutability, immutability and censorship-proof – do not lend themselves to financial obscurity,” said George Pesok, general counselor at crypto software company Tekken.

Senators asked Ms Yellen to answer her questions by March 23.

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