US federal lawmakers are expanding their efforts to track the potential use of cryptocurrency by Russian leaders and oligarchs to evade sweeping sanctions imposed on the country in response to its invasion of Ukraine. Economic advisers and crypto researchers have warned that bitcoin and other currencies could be used to fund Russia’s war efforts, and protect the wealth of its oligarchs.
In a letter to Treasury Secretary Janet Yellen on Wednesday, a group of senators, including Elizabeth Warren and Senate Intelligence Committee Chair Mark Warner, asked about the agency’s plans to monitor crypto networks for evidence of Russian leaders moving money and to enforce sanction compliance. “Criminals, rogue states, and other actors may use digital assets and alternative payment platforms as a new means to hide cross-border transactions for nefarious purposes,” the senators wrote, citing the Treasury's own 2021 report that warned of crypto’s ability to undermine the efficacy of US sanctions.
Last year, the Treasury’s Office of Foreign Assets Control (OFAC) issued guidance for evaluating and mitigating the risks that crypto markets pose to sanctions. An OFAC report asked technology companies and crypto users to decline to engage in “dealings with blocked persons or property.”
This new letter reiterates those same concerns and asks specifically how OFAC is working with foreign governments to enforce its guidance and what roadblocks have prevented it from doing so.
At the same time the letter was sent, US Attorney General Merrick Garland announced a new interagency task force, KleptoCapture, which will be dedicated to enforcing sanctions and other economic restrictions that the US has imposed on Russia. “The Task Force will be fully empowered to use the most cutting-edge investigative techniques,” such as cryptocurrency tracing, to arrest and prosecute individuals found in violation, the announcement noted.
While these coinciding announcements do not appear to be a joint effort, together they mark the most formalized attempt to investigate the role of crypto networks in Russia’s attack on Ukraine.
In the last week, Ukraine has asked crypto exchanges to block all Russian accounts. “It's crucial to freeze not only the addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users,” Mykhailo Fedorov, Ukraine’s minister of digital transformation, tweeted on Sunday.
So far, the crypto industry has largely ignored or condemned calls to freeze Russian holdings. Changpeng Zhao, founder of the world’s largest crypto exchange Binance, told BBC Radio 4 that the company was “not in a position to sanction, like, populations of people,” and said Binance would only respond to requests regarding specific individuals. Another large exchange, Coinbase, told Motherboard that it will not comply with Ukraine’s request in the interest of “economic freedom.”
Bloomberg reported that the White House’s National Security Council and the Treasury Department similarly asked exchanges to aid their efforts. And while crypto networks seem unilaterally opposed to blanket bans, companies like Coinbase are working with the Biden administration to block the accounts of Russians targeted by sanctions.