The US does not want cryptocurrencies to be the “back door” for Russia to circumvent sanctions. And he just warned his own companies

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The US wants to make sure that the economic offensive it has activated against Moscow together with the rest of its allies, including the EU, is seamless. Nor in the digital currency market. Fearing that Russia could use cryptocurrencies to circumvent sanctions, your Treasury Department has decided to make a move and remind both its citizens and businesses that facilitate cryptocurrency exchange that they must also comply with the bans.

His Office of Foreign Assets Control (Ofac) yesterday issued a guide that emphasizes that US citizens and digital asset companies “must remain vigilant to attempts to circumvent regulations” and their obligation to adopt measures to avoid “prohibited transactions”. It is not the first movement in that direction. Some days ago, FinCENanother Treasury Department agency, reminded financial institutions that they have to report any movement that may indicate a move by Russia to evade sanctions.

The control debate, on the table

Ofac’s wake-up call comes after US and European legislators have shown their doubts on the level of compliance of digital asset companies and even platforms such as coinbase or Binance. At the beginning of the month, a group of US senators from the Democratic Party already urged the Treasury to take action and they questioned Ofac’s own capacity to monitor and guarantee compliance with the sanctions against Russia.

From the other side, there is an effort to avoid that image. Coinbase published on Monday an article signed by your legal director in which he breaks down his controls and even assures that he has already blocked more than 25,000 addresses related to Russian persons or entities that you believe are involved in illegal activities. Gemini or the Blockchain Association insist on a similar message. The collective assures that the majority of the companies already incorporate “solid systems”.

Russia has a tool at hand to dodge economic sanctions: cryptocurrencies

Although the US authorities do not believe that cryptocurrencies will allow Russia to completely circumvent the sanctions imposed from the West, have decided to strengthen their efforts in that area to limit its impact. The role of cryptocurrencies as a potential loophole for the Kremlin has in fact been in the spotlight since the start of the war. Other countries, such as Iran or North Korea, have already taken advantage of virtual currencies to mitigate the scope of sanctions. Chainalysis data point out that Russia ranks 18th globally in cryptocurrency adoption, which according to Bloomberg they add up to a minimum value of 214,000 million dollars in the country.

Sanctions such as those applied to Russia or in their day to Iran or North Korea put pressure on a country through its finances. For them to work well, one of their key pillars is the financial system and the banks, which are responsible for analyzing capital movements. Due to their characteristics, cryptocurrencies complicate this supervision. Does that mean they can allow Moscow to bypass all vetoes? Not quite. The US National Security Council has already recognized that the “scale” that the Kremlin would need for something like this makes digital assets an “ineffective” resource and even the founder of Binance assured that the volume of transactions is still too small. That does not mean that the US does not want to remain alert on that front as well.

Russia controls 12% of all cryptocurrencies.  And your government has understood that banning them is a bad idea

Beyond Ukraine and as a backdrop, as Professor Enrique Dans points outthere is the rethinking of the very neutrality of cryptocurrencies, a process that began already as digital assets gained weight and popularity and caught the attention of regulators.

cover image | Michael Fortsch (Unsplash)

The US wants to make sure that the economic offensive it has activated against Moscow together with the rest of…

The US wants to make sure that the economic offensive it has activated against Moscow together with the rest of…

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