September 24, 2022

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Russian President Vladimir Putin could use cryptocurrencies to evade other sanctions launched against the US and the Kremlin for an unprovoked invasion of Ukraine, a Treasury official told lawmakers on Tuesday.

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“Yes, Senator, it is possible,” Elizabeth Rosenberg, the Assistant Secretary of the Treasury for Terrorist Financing and Financial Crimes, said when Sen. Elizabeth Warren, D-Mass., asked her whether digital assets could be used to evade sanctions. can be done.

The Senate Committee on Banking, Housing and Urban Affairs convened a hearing to discuss next steps against Russia’s continued aggression against Ukraine, such as the confiscation of assets from Russian oligarchs and to reduce the price of Russian oil. 7 calls.

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Warren said she was concerned about the possibility of the Russian elite using cryptocurrencies to circumvent sanctions since they invaded Ukraine in February.

“We already knew then that countries like North Korea used crypto to circumvent sanctions and launder at least hundreds of millions of dollars. And Russia could easily be a part of that,” Warren said.

The Treasury Department has already recognized Russian entities Attempts to circumvent restrictions with crypto. 22 individuals and two entities, including a neo-Nazi paramilitary group, were named for the month Helping Russia Digitally Finance the War on Ukraine,

In April, the agency targeted a virtual currency mining agency For the first time, oligarch Konstantin Malofeyev, led by Malofayev along with privately owned commercial bank Public Joint Stock Company TranscapitalBank and 40 other individuals and entities.

Russia-based darknet markets Hydra and Garantex, a virtual currency exchange, were also approved that month to partially circumvent potential sanctions evasion.

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The US government has blocked access to all of their assets located in the US or held by someone residing in the US Treasury, also blocking transactions between those that have been cleared and anyone within the US. The transaction has also been blocked with

But Russia had developed its own digital currency In the hope of doing direct trade in early February with countries that will accept money without converting to dollars first. The country also developed tools to hide the origin of transactions as crypto exchanges can be tracked on the underlying blockchain.

Rosenberg confirmed that anonymity-enhancing technologies and other tools used to hide digital transactions could interfere with the enforcement of sanctions. Treasury issued Ban on these “mixers” for the first time in May and approved another, “Whirlwind Cash,” in August.

Warren noted that Coinbase, a major US cryptocurrency exchange platform, filed a lawsuit this month against the Treasury Department on behalf of Tornado Cash users.

Coinbase Chief Legal Officer Paul Grewal told CNBC that the restrictions set “a dangerous precedent,” but Rosenberg called them effective.

“While they can serve as a deterrent to any criminal (who) wants to use Mixer to launder their money, corruption proceeds or any criminal activity, it is an effective method that we can use. This may be used to signal that we cannot tolerate money laundering,” Rosenberg said.