On Tuesday, lawmakers were informed by an official of the US Department of Treasury that cryptocurrencies could be used for sanction evasions by Russia.
The official stated that Russian President Vladimir Putin may use these virtual currencies for evading the sanctions that have been imposed on the Kremlin due to their invasion of Ukraine.
The question about sanctions evasion with crypto had been put forward by Democratic Senator Elizabeth Warren of Massachusetts.
Terrorist Financing and Financial Crimes’ assistant secretary, Elizabeth Rosenberg, responded that it was entirely possible.
A hearing had been convened by the US Senate Committee on Housing, Banking, and Urban Affairs for discussing the next steps that can be used as deterrents against the continued Russian assault on Ukraine.
These included capping the price of Russian oil by G7 countries and seizing the assets of Russian oligarchs.
According to Senator Warren, she had been concerned about the use of crypto by Russian elites for circumventing sanctions since February, when Russia had first invaded Ukraine.
Warren said that they were already aware that countries like North Korea were using crypto for evading sanctions and laundering millions of dollars. She added that Russia could do the same.
The US Treasury Department has already managed to identify Russian entities who tried using crypto for sanction evasion.
This month, two entities and 22 individuals had been designated for helping Russia in financing the war against Ukraine digitally.
A virtual currency mining company had been targeted in April by the agency, along with a privately owned commercial bank, oligarch Konstantin Malofeyev and 40 other entities and individuals that he led.
The month also saw sanctions imposed on virtual currency exchange Garantex and Darknet market Hydra based in Russia in order to eliminate avenues of sanction evasion.
The US government has already taken steps of blocking access to assets in the country and transactions between sanctioned individuals and people in the US have also been blocked.
However, Russia has been working on developing its own digital currency in order to directly trade with countries.
Moreover, it has also come up with tools that can be used for masking the origins of transactions, as it is possible to track transactions on crypto exchanges that are based on the blockchain.
Rosenberg admitted that sanction enforcement could be compromised with the use of technologies that enhance anonymity and other tools developed for hiding digital transactions.
This had prompted the Treasury to sanction these ‘mixers’ for the first time in May and then in August when it sanctioned the famous ‘Tornado Cash’.
Warren disclosed that US-based crypto exchange Coinbase had filed a lawsuit in the previous month against the US Treasury for users of Tornado Cash.
Paul Grewal, the chief legal officer of Coinbase, said that the sanctions were setting a dangerous precedent, but Rosenberg stated that they were quite effective.
She said that they would deter criminals from using mixers for laundering funds that are generated via criminal activity.