Biden to Announce US Crypto Strategy as Warning Issued on Russia Avoiding Sanctions with Digital Currencies

Slovenia, Ljubljana - 11 11 2019: Golden cryptocurrency Bitcoin on flag of United States of America, USA.
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President Joe Biden will reportedly sign an executive order this week to outline the U.S. government’s strategy for cryptocurrencies, according to Bloomberg. This news comes as the Financial Crimes Enforcement Network (FinCEN) issued an alert on Monday, March 7, to financial institutions, highlighting the potential for attempts to evade sanctions implemented since the start of Russia’s war against Ukraine.

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FinCEN said in the alert, which provides example red flags to assist in identifying suspected sanctions evasion activity, that while large scale sanctions evasion using convertible virtual currency (CVC) by a government such as the Russian Federation is not necessarily practicable, CVC exchangers and administrators and other financial institutions may observe attempted or completed transactions tied to CVC wallets or other CVC activity associated with sanctioned Russian, Belarusian and other affiliated persons. 

“All financial institutions — including those with visibility into cryptocurrency or CVC flows, such as CVC exchangers and administrators — should identify and report suspicious activity associated with potential sanctions evasion quickly and conduct appropriate, risk-based customer due diligence or enhanced due diligence where required,” according to the alert.

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“In the face of mounting economic pressure on Russia, it is vitally important for U.S. financial institutions to be vigilant about potential Russian sanctions evasion, including by both state actors and oligarchs,” Acting Director Him Das said in the alert. “Although we have not seen widespread evasion of our sanctions using methods such as cryptocurrency, prompt reporting of suspicious activity contributes to our national security and our efforts to support Ukraine and its people.”

Ari Redbord, a former senior Treasury Department and now Head of Legal and Government Affairs at blockchain intelligence company TRM Labs, told GOBankingRates that we have already seen regulators across the interagency take action on crypto, including the Treasury providing guidance and sanctioning crypto companies, the SEC taking numerous enforcement actions and the President’s Working Group writing a paper on stablecoins.

“What the executive order will do will bring all of these disparate actions together in order to create a clear, cohesive U.S. government strategy for regulating digital assets,” Redbord said, adding that it has been discussed long before the Russian invasion of Ukraine.

“That said, crypto compliance is more important today than ever before to ensure illicit actors do not abuse the growing crypto economy and Russian actors are not able to use crypto to evade sanctions,” Redbord said. “It is really important to note that cryptocurrency — in the U.S. — especially in the money laundering and sanctions context, is highly regulated today. Treasury requires that cryptocurrency businesses have robust AML and sanctions compliance controls in place. That is the key to stopping sanctions evasion and those regulations are in place today.”

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Bloomberg reports that while the order has been in the works since last year, the crypto industry is facing intense scrutiny from lawmakers, including from Sen. Elizabeth Warren and Senate Banking Committee Chairman Sherrod Brown, over concerns that sanctioned individuals and firms in Russia may be using digital assets to bypass the sanctions.

Hayden Hughes, CEO of crypto social trading platform Alpha Impact, told GOBankingRates that the Ukraine War could be “a watershed moment in crypto regulations, at least from an American perspective.”

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“Since the 1980s, the U.S. government has been unwilling to effect meaningful financial reform without a true crisis,” Hughes said. “It took the 9/11 attacks to pressure Republicans to pass money laundering legislation, and it may well be this conflict that causes crypto to become regulated in a similar way. Still, this order only directs agencies to report to the President and does not directly regulate the asset class. It is possible that by the time the reporting occurs, this crisis will have passed and we will be back to the status quo: both sides of the aisle will be gridlocked and unable to make any meaningful change to the way digital assets are handled.”

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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