U.S. federal lawmakers are expanding efforts to track down the possible use of cryptocurrencies by Russian leaders and oligarchs to evade sweeping sanctions imposed on the country over its invasion of Ukraine. Economic advisers and cryptocurrency researchers have warned that bitcoin and other currencies could be used to finance Russia’s war effort and protect the wealth of its oligarchs.
In a letter Wednesday to Treasury Secretary Janet Yellen, a group of senators, including Elizabeth Warren and Senate Intelligence Committee Chairman Mark Warner, asked about the agency’s plans to monitor encrypted networks for evidence that Russian leaders moved money and Enforce sanctions compliance. “Criminals, rogue states and other actors may use digital assets and alternative payment platforms as new means to hide cross-border transactions for nefarious purposes,” the senators wrote, citing the Treasury Department’s own 2021 report , the report warns that cryptocurrencies have the ability to undermine the effectiveness of U.S. sanctions.
Last year, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued guidance on assessing and mitigating the risks posed by crypto markets to sanctions. An OFAC report asked tech companies and cryptocurrency users to refuse to engage in “transactions with blocked persons or property.”
The new letter reiterates the same concerns and specifically asks how OFAC can work with foreign governments to implement its guidance and what are the barriers preventing it from doing so.
The letter comes as U.S. Attorney General Merrick Garland announced the formation of a new interagency task force, KleptoCapture, that will work to enforce U.S. sanctions and other economic restrictions on Russia. The announcement states that “the task force will be fully empowered to use state-of-the-art investigative techniques,” such as cryptocurrency tracking, to apprehend and prosecute individuals found to be in breach.
While these coincidental announcements do not appear to be the result of a concerted effort, they collectively mark the most formal attempt to investigate the role of encrypted networks in Russia’s attack on Ukraine.
Last week, Ukraine asked cryptocurrency exchanges to block all Russian accounts. “It is crucial to freeze addresses not only related to Russian and Belarusian politicians, but also of ordinary users,” Ukraine’s digital transformation minister Mikhailo Fedorov tweeted on Sunday.
So far, the crypto industry has been largely ignored or condemn Call for a freeze on Russian assets. Changpeng Zhao, founder of Binance, the world’s largest cryptocurrency exchange, told BBC Radio 4 that the company “cannot sanction crowds” and said Binance would only respond to requests about specific individuals. Another large exchange, Coinbase, told Motherboard that it would not comply with Ukraine’s request for “economic freedom.”
Bloomberg reported that the White House National Security Council and the Treasury Department also asked the exchange to assist in their efforts. While crypto networks appear to be unilaterally opposing a blanket ban, companies like Coinbase are working with the Biden administration to block the accounts of sanctioned Russians.