Federal Lawmakers Worry Russian Leaders Are Using Crypto To Avoid Sanctions

US federal lawmakers are stepping up efforts to track the potential use of cryptocurrency by Russian leaders and oligarchs to evade sanctions imposed on the country in response to the invasion of Ukraine. Economic advisers and crypto researchers have warned that bitcoin and other currencies could be used to finance Russia’s war effort, and protect the wealth of oligarchs.

In a letter to Treasury Secretary Janet Yellen on Wednesday, a group of senators, including Elizabeth Warren and Senate Intelligence Committee Chairman Mark Warner, questioned the agency’s plans to monitor crypto networks for evidence of Russian leaders moving money and enforcing sanctions compliance. “Criminals, malicious states, and other actors can use digital assets and alternative payment platforms as a new way to hide cross-border transactions for nefarious purposes,” the senators wrote, noting their own 2021 Finance report that warned of crypto’s ability to undermine the effectiveness of US sanctions.

Last year, the Treasury’s Office of Foreign Assets Control (OFAC) issued guidance on evaluating and mitigating the risk crypto markets pose to sanctions. The OFAC report called on tech companies and crypto users to refrain from “dealing with blocked people or properties.”

This new letter expresses similar concerns and asks specifically how OFAC is working with foreign governments to implement its guidance and what is standing in its way.

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 imposed by the US on Russia. “The Task Force will have the power to use the most cutting-edge investigative techniques,” such as cryptocurrency tracking, to arrest and prosecute individuals found in violation, the announcement noted.

While these timely announcements do not appear to be a joint effort, together they mark the most formal effort yet to investigate the role of crypto networks in Russia’s attacks on Ukraine.

Last week, Ukraine asked crypto exchanges to block all Russian accounts. “It is important to freeze not only addresses related to Russian and Belarusian politicians, but also to sabotage ordinary users,” Mykhailo Fedorov, Ukraine’s digital transformation minister, tweeted on Sunday.

Until now, the crypto industry has been ignored or cursed call to freeze Russian holdings. Changpeng Zhao, the founder of the world’s largest crypto exchange Binance, told BBC Radio 4 that the company “is not in a position to sanction, like a population of people,” and said Binance will only respond to requests about certain individuals. Another major exchange, Coinbase, told Motherboard that it would not comply with Ukraine’s request in the interest of “economic freedom.”

Bloomberg reports that the White House National Security Council and the Treasury Department have also asked the exchange to help with the effort. And while crypto networks appear to be unilaterally fighting blanket bans, companies like Coinbase are working with the Biden administration to block Russian accounts targeted by sanctions.