In response to the Ukraine war, the West imposed sanctions on Russia on an unprecedented scale. Western companies leave the country and the ruble collapses. Meanwhile, US politicians worry that the Kremlin could use bitcoin and other cryptocurrencies to circumvent sanctions. Experts don’t call this possibility particularly likely, but a legislative proposal by US Senator Elizabeth Warren aims to put an end to this.
On March 17, the crypto-skeptical senator introduced the proposal for her Digital Asset Sanctions Enforcement Enhancement Act of 2022 along with other Democrats at a Banking Committee hearing. The law would allow the US Treasury Department to ban transactions from domestic bitcoin exchanges with wallet addresses verified as being from Russia. Additionally, the president would have the power to take action against foreign crypto firms that help Russia circumvent sanctions. Those companies would then have to wait for their funds to be frozen. They would also be prohibited from doing business with Americans.
Controversial reporting requirement for foreign transactions
In addition, the proposed legislation would require US taxpayers to report to FinCEM all transactions with offshore companies worth more than $10,000. The authority belongs to the United States Department of the Treasury and specializes in combating financial crimes.
At the hearing, Warren also emphasized his assessment that “cryptocurrencies represent a new payment option for criminals and fraudsters.” Consequently, it is conceivable that the law wants to strengthen supervision of the crypto space beyond Russian sanctions. At least the crypto think tank does coin center therefore, it warns that the law would “comprehensively restrict the crypto ecosystem under the pretext of tightening sanctions against Russia for its unwarranted invasion of Ukraine.”
evaluate proposed legislation coin center generally as “unnecessary and too broad”. He would also go against the principles of the United States Constitution.
Does the Kremlin use cryptocurrencies at all?
To classify the proposed law, of course, one must ask to what extent the Kremlin could use cryptocurrencies. Most US experts rate this potential as quite low. FBI Director Christopher Wray said on March 10:
They and others are likely to vastly overestimate the ability of the Russians to circumvent sanctions through the use of cryptocurrencies.
Various representatives of the crypto industry also spoke on the subject at the Senate hearing on March 17. Blockchain analytics firm Jonathan Levine chaining he explained that there is no evidence that “Russia or Putin are systematically using cryptocurrencies to circumvent sanctions.” Noisy Bloomberg it was the general perception that the crypto market was too small to make large-scale payments covertly. Blockchain transactions can also be generally traced.
Russia grants crypto license to Sberbank
The fact that Russia has certain crypto ambitions in the current situation is supported by the new crypto license that the Russian Sberbank received on March 17. The bank is one of the largest financial institutions in the country and is predominantly state-owned. Of course, licensing must also be placed in the context of the recent Moscow crypto course. After long debates between the central bank, which was pushing for a general ban on Bitcoin, the Ministry of Finance had already prevailed in the first half of February with the proposal to accept cryptocurrencies. The compromise reached establishes that the cryptocurrency business is left in the hands of specially licensed banks.
In hindsight, this change of course could perhaps also be interpreted as a move to prepare for war. However, it is questionable to what extent the cryptographic license of the Sberbank It will help you avoid sanctions. According to the bank, it wants to guarantee “the security of digital transactions using blockchain technology.” Furthermore, they want to adapt their own crypto business to the new regulatory reality in Russia.
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