WASHINGTON – Democrats worry that Russia could use cryptocurrencies to ease the impact of economic sanctions imposed to punish Russian President Vladimir Putin for invading Ukraine.
A group of lawmakers on Wednesday asked the Biden administration if they needed additional tools to ensure that malicious actors would not evade US and multilateral sanctions against Russia by using virtual currencies.
“Strong enforcement of sanctions in the cryptocurrency industry is crucial, given that digital assets that allow entities to circumvent the traditional financial system can increasingly be used as a tool to avoid sanctions.” , sen. Elizabeth Warren (Massachusetts), Mark Warner (Virginia), Jack Reed (RI) and Sherod Brown (Ohio) said letter, letter to Finance Minister Janet Yellen.
The letter added that “there are growing fears that Russia could use cryptocurrencies to circumvent the broad new sanctions it faces from the Biden administration and foreign governments in response to its invasion of Ukraine.”
Sanctions imposed by the United States and the rest of the world have severely limited Russia’s ability to do business, crushing the value of the Russian currency and closing its stock market. But some have speculated that cryptocurrencies – speculative assets that claim to be an alternative to government-backed currency – could give Russia a way to ease sanctions as cryptocurrencies such as bitcoin are traded outside the traditional banking system.
Democrats are not the only ones worried about the possibility of ending crypto.
“I want to know how it was used by the Russians,” Senator Lindsey Graham (RS.C.) told HuffPost after saying earlier this week that cryptocurrency was “raising its ugly head” in Russia.
Other Republicans have been more skeptical about the issue of cryptocurrencies, suggesting that their effect may be insignificant.
“I don’t think it’s very plausible for the Russian government to be able to avoid significant sanctions with cryptocurrency right now,” said Sen. Pat Toomey, a senior Republican on the Senate Banking Commission.
The topic also appeared at a hearing in the House of Representatives on Wednesday with Federal Reserve Chairman Jerome Powell, where Democrats asked Powell how much of a problem cryptocurrency could be.
“It is high time we all led the way in creating a regulatory environment in which we, not the world’s despots, terrorists and money launderers, will benefit from the emergence of cryptocurrency,” said spokesman Jim Hymes (D-Conn.).
Powell said he did not know if the cryptocurrency offered Russia a workaround for sanctions, but that this was an option that Congress should consider.
“This underscores the need for congressional action on digital finance, including cryptocurrencies,” Powell told the House Financial Services Committee. “We have this thriving industry that has many, many parts and no regulatory framework that needs to be there.”
Sen. Debbie Stabenov (D-Mich.), Chairman of the Senate Committee on Agriculture, which oversees the Commodity Futures Trading Commission, one of the agencies with a well-known regulator on the crypto industry, said Congress should “close the door” to protect American consumers by fraud. But she said Congress should not act ad hoc because of the war in Ukraine.
“What we need is a structure for transparency, oversight and accountability,” Stabenov told HuffPost.
Congress imposed tax reporting requirements on some players in the crypto industry last year to help pay for roads and bridges in a bipartisan infrastructure bill. The industry lobbied hard against the new rules, but ultimately lost. Since then, the industry has increased its investment in lobbying.
“The number of people who came out of the window trying to beat us for it was incredible,” Warner said.