Russian Aggression Hastens Lawmakers' Push to Enforce Sanctions in Crypto Industry

Sadik Demiroz/Getty Images

The Justice Department also launched a ‘KleptoCapture’ task force to target the use of cryptocurrencies for sanctions evasion.

Sen. Elizabeth Warren, D-Mass., and the chairmen of three key committees, are worried about the Treasury Department’s ability to enforce new sanctions against Russia, given reports the Kremlin is planning to evade them by increasing its activities in the cryptocurrency industry.

“We are concerned that [the Office of Foreign Assets Control] has not developed sufficiently strong and effective procedures for enforcement in the cryptocurrency industry,” reads a letter Warren sent to Treasury Secretary Janet Yellen Wednesday along with Intelligence Committee Chair Mark Warner, D-Va., Banking Committee Chair Sherrod Brown, D-Ohio, and Armed Services Committee Chair Jack Reed, D-R.I.

The recent sanctions are the main U.S. response to Russia’s attack on Ukrainian autonomy, but could end up having minimal effect, especially given the department’s reliance on “voluntary self-disclosure from sanctions violators for enforcement,” the senators said. Indeed 67% of the Trump administration’s enforcement efforts in this area came from self-disclosures, according to a report cited in their letter.

“This model appears to be particularly ill-suited for enforcing sanctions compliance in the cryptocurrency industry given the prevalence of pseudonymity and the current weakness of the industry’s compliance programs,” the senators wrote, noting, “These concerns have become even more urgent given the sanctions imposed on Russia after its invasion of Ukraine and reports that ‘Russian entities are preparing to blunt some of the worst effects’ of the sanctions that have been levied on the country by using the array of ‘cryptocurrency-related tools as its disposal.’”

The letter points to various ways sanctioned regimes such as Iran and North Korea have been able to use the cryptocurrency industry to reduce the impact of U.S. sanctions and flags the possible return of ransomware attacks to fund Russian operations in the absence of access to the centralized global financial infrastructure.

“There are growing concerns that Russia may use cryptocurrencies to circumvent the broad new sanctions it faces from the Biden administration and foreign governments in response to its invasion of Ukraine,” the senators wrote. “This could include the use of dark web marketplaces that are powered by cryptocurrencies to move funds and conduct transactions; the use of crypto wallets and mixing services that allow sanctioned entities to transfer and hide their wealth; deployment of a digital ruble that would allow Russia to conduct foreign trade without converting their currency into dollars; and ransomware attacks that would allow Russian actors to recoup revenues lost to sanctions.” 

Fear of authoritarian regimes using digital currencies to escape sanctions as a reliable non-military whip is bi-partisan. But it’s complicated. Lawmakers want the U.S. to compete in the crypto space, not just crush it. 

“Imagine right now if Russia had its own digital currency,” Rep. Mike McCaul, R-Texas, ranking member of the House Foreign Affairs Committee and co-chair of the congressional internet caucus, said Monday at the annual State of the Net conference. “Would these sanctions have any impact?”  

“It's going to happen, just like the internet happened … and what would be the ramifications of countries having their own digital currency, because I think that is going to be the way of the future,” he said. "And I argue the United States has to lead, and we need to set the rules of the road on this and we need to start working on our own digital currency.”

Sen. Warner, is also sensitive to the industry’s appeals in this regard. He’s signed onto another letter several Republican senators joined in sending to Yellen in December recognizing challenges that might exist for crypto miners and other stakeholders outside of cryptocurrency exchanges to comply with know-your-customer requirements that exist for banks and other financial institutions.

The senators’ letter Wednesday comes just as the Justice Department also launched “an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions and economic countermeasures that the United States has imposed, along with allies and partners, in response to Russia’s unprovoked military invasion of Ukraine.”

The Justice-led task force—called KleptoCapture—will include a focus on “combating unlawful efforts to undermine restrictions taken against Russian financial institutions, including the prosecution of those who try to evade know-your-customer and anti-money laundering measures; [and] targeting efforts to use cryptocurrency to evade U.S. sanctions, launder proceeds of foreign corruption or evade U.S. responses to Russian military aggression.”

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.