Senator Warren of Massachusetts United States has proposed the Digital Assets Sanctions Compliance Enhancement Bill (Bill) to prevent cryptocurrency companies from conducting business with sanctioned Russian persons.
This Bill came as a response to the recent threat of Russia using cryptocurrency to avoid international economic sanctions. Australia, alongside the United States, the European Union, and the United Kingdom, have applied these sanctions to prevent designated persons in Russia from moving their assets. However, commentators argue that cryptocurrency may be an alternative to move assets over the imposition of economic sanctions. This is because cryptocurrency is for the most part decentralised and out of reach of governments and financial institutions. Iran, North Korea, and Venezuela have proven that crypto may be used to evade economic sanctions in this way.
As such, Senator Warren’s Bill aims to implement secondary sanctions on any cryptocurrency companies and exchanges that transact with designated persons in Russia. Senator Warren has been strictly against cryptocurrency since its meteoric rise in 2020. According to Senator Warren, cryptocurrency is merely a “new payment option for criminals and cheats”. The Bill already has the support of ten other senators.
Interestingly, the deputy director and digital innovation officer of the Financial Crimes Enforcement Network as well as the president of the Blockchain Association of Ukraine noted that it would be extremely difficult for any Russians to circumvent sanctions with cryptocurrency. Due to the sheer combined wealth of Russian oligarchs (approximately $3T), it would be near impossible to hide even small split sums of money ($100M) through cryptocurrency. Since cryptocurrency operates on a public ledger, it would be relatively easy for crypto analysis firms to trace back transactions to the oligarchs.
The Ukraine conflict has highlighted the need for cryptocurrency regulation, but it is hard to say whether this Bill is the answer. It will be interesting to see the stance of cryptocurrency exchanges and companies in the following weeks as the Bill moves through the US parliament.
For the full reading of the Bill, see here.