U.S. Senators Doubt Treasury Can Ensure Russia Does Not Evade Sanctions

  • U.S. lawmakers are pressing the Treasury Secretary to stop Russia from using digital assets as a way of avoiding Western sanctions.
  • Influential senators Warren and Brown fear that crypto could be used to thwart NATO efforts to force Putin out of Ukraine.

Democratic senators Elizabeth Warren, Mark Warner, Sherrod Brown and Jack Reed have called on the Treasury Department to adopt the necessary mechanisms to ensure that cryptocurrencies are not used by the Russian government as a means to evade the sanctions imposed by western allies after the invasion of Ukraine.

In a letter to Treasury Secretary Janet Yellen, lawmakers raised concerns about whether the department’s Office of Foreign Assets Control (OFAC) was actually pushing effective measures to enforce sanctions and prevent the crypto industry from contributing to their evasion.

"Strict enforcement of sanctions compliance in the cryptocurrency industry is critical as digital assets, which allow entities to circumvent the traditional financial system, can increasingly be used as a tool for sanctions evasion", emphasized the letter cited by Reuters.

To force the government of Vladimir Putin to call a ceasefire and withdrawal of Russian troops from Ukraine, the United States and the European Union have applied a series of economic sanctions, in addition to supporting the Ukrainian resistance with weapons and funds.

The Biden Administration Does Not Believe Russia Can Use Crypto

Among the sanctions are the extraordinary removal of Russian banks from the SWIFT (Society for World Interbank Financial Telecommunication) system, the confiscation of government deposits in bank accounts in the West, and restrictions on the assets and money of Russian oligarchs.

Senators fear that digital wallets and so-called dark web marketplaces will allow officials and Putin-allied Russian elites to hide their assets, thereby evading banking controls. 

However, U.S. officials are convinced that Russia will not be able to use crypto to completely avoid the effects of the sanctions, although it is well known that the Russian government had been preparing for this moment for years. Russia has accumulated reserves of more than 630 billion dollars and created its own money transfer system, SPFS.

"The scale that the Russian state would need to successfully circumvent all financial sanctions from the US and its partners would almost certainly make cryptocurrencies an ineffective primary tool for the state," the director of cybersecurity at the Russian Federation said this week. National Security Council, Carol House.

On the Flipside

  • Democratic lawmakers allied with the Biden administration doubt that OFAC is capable of effectively monitoring strict compliance with sanctions by cryptocurrency platforms.
  • They claim the agency has become “increasingly reliant on voluntary self-disclosure.”
  • Through their letter, the legislators have asked the Treasury to respond to their concerns on the subject before March 23rd.
  • Since the beginning of the Russian occupation, Ukraine has been asking for cryptocurrency support to help finance its war expenses.

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Santiago Contreras

Santiago is a Venezuelan blockchain reporter specializing in economic and financial issues, with special emphasis on stablecoin trading as well as political and regulatory issues related to Latin America. Every day he reviews and analyzes movements in the crypto market to offer readers first-hand information that can help them make sound decisions in the exciting world of crypto.