Vladimir Putin might become the newest member of the ever-growing crypto bro army to side-step sanctions. In a chilling warning on Tuesday, a US Treasury official warned that Putin and his stooges could use cryptocurrencies to evade the unprecedented wave of economic sanctions slammed on Russia by the West for his brutal invasion of Ukraine.
It comes after the Treasury Department reported several Russian figureheads attempting to get around the sanctions by using crypto. Two entities and 22 individuals were found this month alone trying to help finance Putin’s war with digital assets – including a neo-Nazi paramilitary group.
Elizabeth Rosenberg, the Treasury’s assistant secretary for Terrorist Financing and Financial Crimes, said “Yes, senator, that’s possible,” after being asked if blockchain-based currencies could be used to effectively to evade sanctions.
Senator Elizabeth Warren said she had been worried about Russian elites leveraging cryptocurrencies to skirt the unprecedented sanctions against the country ever since Putin’s regime invaded Ukraine in February.
“Back then we already knew that countries like North Korea had used crypto to skirt sanctions and launder at least hundreds of millions of dollars. And Russia could easily be part of that,” Warren said.
The warning came during a hearing of the Senate Committee on Banking, Housing and Urban Affairs to discuss the next load of deterrents against Russia.
Back in April, a virtual currency mining agency was targeted by the agency for the first time for trying to evade Russian sanctions. Oligarch Konstantin Malofeyev was also targeted along with 40 other individuals.
Despite numerous attempts to quell any evasion by the US, Russia had reportedly developed their very own digital currency as early as February.
The hope was that they could use it to trade with other countries without having to convert it to dollars first.
The largest country in the world also developed tools to try and hide the origins of transactions – as all crypto exchanges can usually be traced back on the blockchain.
These cloaking technologies were noted by Rosenburg as being a threat to the enforcement of sanctions.
Rosenburg also suggested that sanctioning cryptocurrency mixers could be a good way to crack down on foreign entities attempting to use digital assets for unlawful means.
“When [sanctions] can serve as a deterrent to any criminal that would seek to use a mixer in order to launder their funds […] that’s an effective avenue we can use in order to signal that we cannot tolerate money laundering,” Rosenberg stated.
“Whether that’s for a Russian criminal actor, an Iranian, a North Korean or wherever they may come from.”
Not the first warning about crypto being used to sidestep Russian sanctions
This is not the first time that the Treasury has made these warnings. Earlier this year, it cautioned that because cryptocurrency exchanges don’t follow the same background checks and anti-money laundering rules that banks do, they have become an increasingly dangerous threat to US sanctions.
The British National Bureau of Economic Research made a similar point in a report published in October, 2021. The researchers warned that criminals could move money between low or no-background checking exchanges to hide their tracks with reasonable ease.
However, as Verdict has reported in the past, exchanges have so far been reluctant to cut off Russia from their services. In fact, some have actively worked against any restrictions.
GlobalData is the parent company of Verdict and its sister publications.