Treasury Department Russia avoid sanctions using crypto

Russian President Vladimir Putin could use cryptocurrencies to evade U.S. and other sanctions against the Kremlin’s unprovoked invasion of Ukraine, a Treasury official told lawmakers on Tuesday.

“Yes, Senator, it’s possible,” Elizabeth Rosenberg, assistant secretary of the Treasury for terrorism financing and financial crime, asked Sen. Elizabeth Warren, a Massachusetts Democrat, if she could use digital assets to evading sanctions.

The Senate Banking, Housing and Urban Affairs Committee will hold hearings to discuss next steps to prevent Russia from continuing to invade Ukraine, such as seizing the assets of Russian oligarchs and a G7 deal to cap Russian oil prices.

Warren said she has been concerned about the possibility of Russian elites using cryptocurrencies to bypass sanctions since the country invaded in February.

“We already knew at the time that countries like North Korea were already using cryptocurrencies to evade sanctions and launder at least hundreds of millions of dollars. Russia could easily be a part of that,” Warren said.

The Ministry of Finance has determined Russian entity Attempts to evade sanctions with cryptocurrencies.This month, 22 individuals and two entities, including a neo-Nazi paramilitary group, were designated as Helping Russia Digitally Fund the War on Ukraine.

In April, the agency virtual currency mining agency For the first time together with the oligarch Konstantin Malofeev, the public joint stock company Transkapitalbank of private commercial banks and 40 other individuals and entities led by Malofeev.

Russia-based Darknet Market Hydra and virtual currency exchange Garantex were also sanctioned that month, in part to cut off potential avenues for sanctions evasion.

The U.S. government prohibits access to all of its assets in the U.S. or held by persons residing in the U.S. Treasury Department, and also blocks transactions between sanctioned persons and anyone within the U.S.

But by developing its own digital currency As early as February, it was hoped to transact directly with countries that would accept funds without first converting to U.S. dollars. The country has also developed tools to obscure the origin of transactions, as crypto exchanges can be tracked on the underlying blockchain.

Rosenberg confirmed that anonymity-enhancing technologies and other tools used to hide digital transactions could interfere with sanctions enforcement.Ministry of Finance released The first sanctions against these “mixers” May and approved another, “Tornado Cash” in August.

Warren mentioned that Coinbase, the leading U.S. cryptocurrency exchange, filed a lawsuit this month with the Treasury Department on behalf of Tornado Cash users.

Coinbase’s chief legal officer Paul Grewal told CNBC that the sanctions set “a dangerous precedent,” but Rosenberg said they were effective.

“When they can act as a deterrent to any criminal who tries to use mixers to launder money, corrupt proceeds or any criminal activity, that’s an effective way we can use to show that we’re not going to tolerate money laundering,” Rosenberg said .