In brief
- Senator Warren and three other Democratic senators recently sent a letter to Treasury Secretary Janet Yellen about crypto firms' compliance with Russia sanctions.
- She claims there's evidence that some crypto platforms aren't following rules meant to ensure sanctions compliance.
The U.S. and its allies have cut off the Russian Central Bank from hundreds of billions in foreign reserves. They've removed Russian banks from the SWIFT communications network. And financial transactions between the West and Russian state actors are banned.
But some U.S. lawmakers are still concerned that Bitcoin and other cryptocurrencies can be used to bypass sanctions if the crypto industry isn't on board. Primary among them is Senator Elizabeth Warren, who says she is drafting a "new bill to ensure crypto isn't used by Putin and his cronies to undermine our economic sanctions."
According to reporting from NBC News, which broke the news, the proposal would in part "seek to make it easier to verify the identities of customers and transfers to private crypto wallets by requiring financial institutions to keep detailed records and submit reports to the Treasury Department."
On his first day in the White House, President Biden froze federal rulemaking, including a similar proposed regulation from the Financial Crimes Enforcement Network (FinCEN) that would "require banks and money service businesses ('MSBs') to submit reports, keep records, and verify the identity of customers" who transacted with private (i.e., self-hosted) wallets. The FinCEN rule had been proposed by outgoing Treasury Secretary Steve Mnuchin on December 18, 2020. It drew the ire of the cryptocurrency industry, who argued that it was not only an effort by the Trump administration to ram through regulations without industry input but also amounted to privacy violations of U.S. citizens.
Sen. Warren's office has not yet responded to a Decrypt request for comment on the specifics of her proposal and how it aligns with FinCEN draft rules.
Sen. Warren was one of four Democratic senators last week to press current Treasury Secretary Janet Yellen on how to ensure cryptocurrency exchanges and other service providers aren't providing Russia with a means to circumvent sanctions. In a letter to the Treasury secretary, Warren, Mark Warner, Jack Reed and Sherrod Brown noted that digital assets "allow entities to bypass the traditional financial system."
However, crypto services and exchanges provide on-ramps and off-ramps to crypto by connecting it to the traditional financial system. Major exchanges such as Coinbase and Binance contend that they are actively monitoring and complying with all applicable sanctions, thereby closing major thoroughfares to the Russian government.
Sen. Warren told MSNBC's Andrea Mitchell on Tuesday that, with regard to know-your-customer regulations, "we have a lot of evidence that not all the crypto platforms are actually adhering to those rules, and collecting the information and then reporting the information and then shutting down where we have sanctions."
Thus far, however, there's no compelling public evidence that crypto actors are indeed undercutting sanctions. Yellen said last week the Treasury Department would monitor how sanctions are working but pointed out in a response to the senators about crypto: "It’s not that that sector is completely one where things can be evaded."