WASHINGTON – A group of Democratic senators voiced concern Wednesday about the potential of cryptocurrencies to undermine US sanctions against Russia. They asked the Ministry of Finance to explain how it will mitigate the risk.
Russia’s invasion of Ukraine last week fueled demand for bitcoin and other cryptocurrencies in both countries. Assets, which can usually be transferred from two countries without a regulated intermediary, are often seen as an alternative payment network, and the Treasury warned in October that they could “potentially reduce the effectiveness of US sanctions”.
“These concerns have become even more urgent given the sanctions imposed on Russia since its invasion of Ukraine,” said Sen. Elizabeth Warren (D., Massachusetts), Mark Warner (D., Virginia), Sherrod Brown (D., Ohio) and Jack. Reed (D., RI) said in a letter to Finance Minister Janet Yellen.
Chainalysis, a company that tracks cryptocurrency transactions and has multimillion-dollar contracts with U.S. law enforcement, has found no evidence of evading heavy sanctions from Russians in cryptocurrency markets, a spokeswoman said Wednesday.
Current and former officials familiar with the finance ministry’s sanctions programs say cryptocurrency markets are not large enough to be used to circumvent the measures on a large scale. Russian individuals and legal entities know how to use the traditional financial system to launder money through offshore financial services, networks of fictitious companies and real estate, sanctions experts said.
Democrat senators cite recent reports that North Korea has used stolen cryptocurrencies to fund its nuclear missile program in violation of international sanctions, and that Iran has used bitcoin mining to generate money that can be used to buy imports. . They also noted estimates that nearly three-quarters of payments for ransom software or more than $ 400 million in cryptocurrency went to organizations linked to Russia.
Lawmakers said the Finance Ministry’s Sanctions Service relied too much on self-detection by violators to make enforcement efforts. They also said many crypto companies have been slow to adopt sanctions and other regulations, and that decentralized financial platforms known as DeFi rarely check their customers for anti-money laundering regulations.
“We are concerned about this [the sanctions office] has not developed strong enough and effective procedures for application in the cryptocurrency industry, “the senators wrote.
They asked the finance ministry to answer a series of questions and explain how it plans to prevent the use of cryptocurrencies to avoid sanctions by March 23rd.