U.S. lawmakers push Treasury to ensure Russia cannot use cryptocurrency to avoid sanctions

FILE PHOTO: U.S. Senator Elizabeth Warren (D-MA) questions Treasury Undersecretary For Domestic Finance Nellie Liang as she testifies before the Senate Banking Committee, in Washington, D.C, U.S., February 15, 2022. Win McNamee/Pool via REUTERS/File Photo

(Reuters) - Senator Elizabeth Warren and three other Democratic lawmakers on Wednesday urged the Treasury Department to ensure the cryptocurrency industry is complying with sanctions imposed on Russia, expressing concern that digital assets could be used to undermine U.S. foreign policy goals.

In a letter sent to Treasury Secretary Janet Yellen, Warren along with Senators Sherrod Brown, Mark Warner and Jack Reed questioned whether the department’s Office of Foreign Assets Control (OFAC) had effective guidelines in place to enforce sanctions compliance within the crypto industry.

“Strong enforcement of sanctions compliance in the cryptocurrency industry is critical given that digital assets, which allow entities to bypass the traditional financial system, may increasingly be used as a tool for sanctions evasion,” the letter said.

The United States has unleashed a slew of sanctions targeting Russia's banks, state-owned entities and elites, among others, following the country's invasion of Ukraine

The senators raised concerns that crypto wallets and dark web marketplaces could enable sanctioned individuals to hide their assets from public view.

Biden administration officials have said that they do not believe Russia would be able to use cryptocurrency to completely evade sanctions.

“The scale that the Russian state would need to successfully circumvent all U.S. and partners’ financial sanctions would almost certainly render cryptocurrency as an ineffective primary tool for the state,” said Carol House, the director of cybersecurity for the National Security Council, during a webinar on Wednesday.

But the Democratic lawmakers said it was unclear whether OFAC had appropriate guidelines to effectively monitor the crypto industry’s compliance with sanctions, noting that the agency has become “increasingly reliant upon voluntary self-disclosure.”

The senators asked that Treasury respond to a series of questions by March 23 on the issue, and how the agency ensures that crypto is not being used by maligned actors.

(Reporting by Hannah Lang in Washington; Editing by Cynthia Osterman)

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