US federal lawmakers are expanding their efforts to track the potential use of cryptocurrency by Russian leaders and oligarchs to circumvent sweeping sanctions imposed on the country in response to the invasion of Ukraine. Financial advisers and crypto researchers warn that Bitcoin and other currencies could be used to fund Russia’s war efforts and protect the wealth of its oligarchs.
In a letter to Treasury Secretary Janet Yellen on Wednesday, a group of senators, including Elizabeth Warren and Senate Intelligence Committee Chairman Mark Warner, asked about the agency’s plans to monitor crypto networks for evidence of Russian leaders moving money and enforce sanctions compliance. “Criminals, rogue states and other actors may use digital assets and alternative payment platforms as a new means to hide cross-border transactions for nefarious purposes,” the senators wrote, citing the Treasury’s own 2021 report warning of undermining crypto’s potential. Effectiveness of US sanctions.
Last year, the Treasury’s Office of Foreign Assets Control (OFAC) issued guidance to assess and mitigate the risks crypto markets pose to sanctions. The OFAC report asked technology companies and crypto users to refuse to “deal with restricted persons or property.”
This new letter reiterates those same concerns and asks specifically how OFAC is working with foreign governments to implement its guidance and what roadblocks are preventing it from doing so.
At the same time the letter was sent, US Attorney General Merrick Garland announced a new interagency task force on kleptocapture, which would be dedicated to enforcing sanctions and other economic sanctions imposed by the US on Russia. “The task force will have full authority to use the most sophisticated investigative techniques, such as cryptocurrency tracing, to arrest and prosecute individuals found in violation,” the release said.
While these coincidental announcements do not appear to be a joint effort, together they mark the most formal effort to investigate the role of crypto networks in Russia’s attacks on Ukraine.
In the past week, Ukraine has asked crypto exchanges to block all Russian accounts. “It is crucial not only to freeze addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users,” Ukraine’s Digital Transformation Minister Mykhailo Fedorov tweeted on Sunday.
Until now, the crypto industry has largely ignored or Condemned Calls to freeze Russian holdings. Changpeng Zhao, the founder of Binance, the world’s largest crypto exchange, told BBC Radio 4 that the company was “not in a position to endorse a population of people” and that Binance would only respond to requests related to specific individuals. Another large exchange, Coinbase, told Motherboard that it would not comply with Ukraine’s request in the interest of “financial freedom”.
Bloomberg reports that the White House’s National Security Council and the Treasury Department have asked the exchange to help with their efforts. And while crypto networks seem unilaterally opposed to blanket bans, companies like Coinbase are working with the Biden administration to block accounts of Russians targeted by the sanctions.