Several senators asked the Treasury Department this week for an update on the agency’s ability to enforce cryptocurrency sanctions against Russia and others in light of concerns that Russia will increase its use of cryptocurrency in the face of a wide-ranging financial sanctions in response to its invasion of Ukraine.
Sens. Mark Warner, D-Va., Elizabeth Warren, D- Mass., Sherrod Brown, D- Ohio, and Jack Reed, D- R.I., sent a letter Wednesday to Treasury Department Secretary Janet Yellen inquiring about the department’s progress in monitoring and enforcing sanctions compliance by the cryptocurrency industry. The senators expressed their concerns in the March 2 letter that cybercriminals and rogue states may use digital assets platforms as a means to hide cross-border transactions financial transactions.
“Given the need to ensure the efficacy and integrity of our sanctions program against Russia and other adversaries, we are seeking information on the steps Treasury is taking to enforce sanctions compliance by the cryptocurrency industry,” the letter reads.
The senators cited growing concerns that Russia may use cryptocurrencies to circumvent the broad new sanctions it faces from the U.S. and other countries in response to its invasion of Ukraine. The letter points out that previously sanctioned regimes such as Iran and North Korea have utilized the cryptocurrency industry to reduce the impact of U.S. sanctions. In the absence of access to the centralized global financial infrastructure, Russia could use cryptocurrency to fund Russian cyber operations, they said.
Additionally, the senators expressed concern that the Office of Foreign Assets Control (OFAC) has not developed sufficiently strong and effective procedures for enforcement in the cryptocurrency industry.
And they said that Treasury’s reliance on “voluntary self-disclosure from sanctions violators for enforcement” could also be ineffective in monitoring how well sanctions are working. “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 said.
The senators asked for answers to a list of related questions by March 23, including “what additional tools, including legal authorities or funding, might be necessary for OFAC to ensure that cryptocurrency participants are not able to help Russia or other malign actors evade U.S. and multilateral sanctions.”