With the risk of Russia dodging the roils of Sanctions placed upon it by Western nations using cryptocurrencies increasingly becoming real, some senate democrats are now questioning how the Treasury Department plans on preventing Russia from bypassing sanctions.
In a Wednesday letter to Treasury secretary Janet Yellen, four U.S. senators led by Elizabeth Warren raised concerns about the possibilities of some crypto firms doing little to nothing in enforcing the rules laid out against Russia for invading Ukraine, undermining the efficacy of the U.S. sanctions regime.
“There are growing concerns that Russia may use cryptocurrencies to circumvent the broad new sanctions it faces from the Biden administration and foreign governments in response to its invasion of Ukraine.” wrote the group of lawmakers.
“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 Treasury is taking to enforce sanctions compliance by the cryptocurrency industry.”
Reports of Russia bypassing sanctions are even more troubling given that most players in the cryptocurrency industry are unwilling to crack the whip on Russian nationals, as it would defeat the purpose of decentralization according to some crypto proponents.
The lawmakers went on to argue that the Treasury’s Office of Foreign Assets Control (OFAC) was ill-suited to enforce the sanction rules given that the nature of cryptocurrencies require self-disclosure which could take months or years to extract.
“This model appears to be particularly ill-suited for enforcing sanctions compliance in the cryptocurrency industry given the prevalence of pseudonymity and the current weakness of the industry’s compliance programs.“
They also laid out five questions, seeking answers before March 23, 2022. Among others, they sought to know how the OFAC seeks to work with the international community in ensuring Russia is not evading sanctions using cryptocurrencies. They also wanted to know if the OFAC needed any more legal authority or additional funding in ensuring that cryptocurrency participants are not able to help Russia or other malign actors evade the U.S. and multilateral sanctions.
In a Wednesday interview with Bloomberg, Binance’s Changpeng ‘CZ’ Zhao said that although Binance was complying with the rules by restricting sanctioned individuals, expanding such restrictions to other Russians would be “unethical for us to do”, adding that the crypto industry followed the same rules as banks.
Similar sentiments have flowed from other industry players such as Jessee Powell, Kraken’s CEO who is opposed to a request by Ukraine’s vice-prime minister to block addresses of Russian users.
