If approved, Treasury Secretary Janet Yellen would have the power to stop American crypto exchanges from processing transactions involving wallets that are based in Russia.
A new bill has been proposed that would give Joe Biden's administration greater power to clamp down on Russians who are using cryptocurrencies to evade economic sanctions.
The measures have been proposed by U.S. Senator Elizabeth Warren, who has long been a critic of digital assets.
If approved, Treasury Secretary Janet Yellen would have the power to stop American crypto exchanges from processing transactions involving wallets that are based in Russia. Her department would also be asked to effectively name and shame foreign trading platforms that are a "high risk" for sanctions evasion, money laundering, or other illicit activities.
Meanwhile, the president would be required to "identify foreign digital asset actors that are facilitating evasion of sanctions against Russia" — and Biden would have authorization to block their assets.
American taxpayers would also be affected by the Digital Asset Sanctions Compliance Enhancement Act, as they would be forced to file a form if they are involved in offshore crypto transactions worth more than $10,000.
Debate on Crypto Continues
Warren's move is in response to fears that crypto could be used to blunt the impact of economic sanctions imposed following Russia's invasion of Ukraine. However, several blockchain intelligence firms — and some U.S. officials — have said this is unlikely to be a major concern given the small size of the crypto markets, and the fact that the flow of funds can be traced on the blockchain.
While the likes of Visa and Mastercard have suspended their operations in Russia, crypto exchanges have been criticized for failing to do the same. In a statement, Warren added:
"Putin and his cronies can move, store, and hide their wealth using cryptocurrencies, potentially allowing them to evade the historic economic sanctions the U.S. and its partners across the world have levied in response to Russia’s war against Ukraine."
Warren sits on the Senate Banking Committee — and the proposed bill comes despite the co-founder of a blockchain intelligence firm telling that committee that the issue isn't widespread. Jonathan Levin of Chainalysis said:
"We have not seen evidence of Russia or Putin systematically using cryptocurrencies to evade sanctions."
In recent days, rival blockchain intelligence firm Elliptic said it has identified hundreds of thousands of crypto addresses with links to sanctioned Russian individuals and businesses — and one digital wallet has "significant cryptoasset holdings" worth millions of dollars.
And earlier this month, Coinbase confirmed that it blocks more than 25,000 addresses "related to Russian individuals or entities we believe to be engaging in illicit activity."
Elliptic has stressed that it is cooperating with government agencies to ensure that cryptoassets cannot be used to hide wealth, adding:
"Crypto wallets are fundamentally different from bank accounts. Funds can be moved through thousands of new addresses at the click of a button — meaning that sanctions screening requires more than simply matching customers' wallet addresses with those published on sanctions lists in order to be effective."
Warren's bill will undoubtedly have an impact on crypto exchanges if it passes — and it's unclear whether the toughened rules would prompt these trading platforms to suspend their services in the country altogether.
A number of major trading platforms have indicated that they will cut off Russian users if they are legally obliged to do so, but argue that it is not their place to make this decision on their own.