- Congress Moves Forward With Russian Cryptocurrency Transparency Law
- Lawmakers want to know when, why, and how the State Department is using crypto to reward whistleblowers
As the war in Ukraine rages on, Congress is keen to determine exactly what role cryptocurrencies have played in the conflict over the past seven months.
Russia’s Cryptocurrency Transparency Law passed the House on Tuesday and moved to the Senate, where it is currently in committee. The bill covers several topics that have attracted attention since Russia’s invasion of Ukraine.
“The imperative to starve Valdimir Putin of funds for Russia’s illegal war in Ukraine has reignited attention to the role cryptocurrencies can potentially play in money laundering and sanctions evasion,” he said. Bill Rep. Gregory Meeks, DN.Y., said in a statement. after the bill is passed in the House.
The bill will require the State Department to submit a report to Congress detailing how “cryptocurrencies or other technologies incorporating blockchain” have been used to promote economic development and provide humanitarian assistance to Ukraine, according to current draft. He will also ask the Treasury and the State Department to compile a report on the impact of cryptos on the effectiveness and enforcement of sanctions against Russia.
The bill also directs the Secretary of State to notify certain congressional committees at least 15 days before making a crypto payment as part of his “Rewards for Justice Program,” a program to combat corruption. terrorism that rewards individuals for information about illicit activities.
The State Department said in 2021 that some rewards can be paid in cryptocurrencies, but with this new bill, Congress will want an explanation of why digital assets are being used as opposed to fiat currencies and traditional payment methods.
A new diplomatic interlocutor on cryptoassets
Under the bill, the State Department would be required to appoint a new role: the Director of Digital Currency Security.
“While there are legitimate and valuable use cases for cryptocurrencies, certain digital asset products can be used to obscure the origin of transactions and facilitate the evasion of sanctions,” Meeks said.
Whether cryptocurrencies can be used to evade sanctions has been the subject of ongoing debate since the start of the war. While lawmakers, especially on the political left, have argued that cryptos play a significant role in illicit financial activity, proponents of digital assets counter that the transparent nature of cryptos makes this nearly impossible on a large scale.
“I will quote my successor as adviser to the Assistant Secretary of the Treasury, who recently said ‘you can’t flip a switch overnight and run a G20 economy on cryptocurrency, there’s just no not liquidity,” Michael Mosier, former acting director and current deputy director and chief digital innovation officer of the Financial Crimes Enforcement Network (FinCEN), told a congressional hearing in March.
Also on Tuesday, as Russia’s Cryptocurrency Transparency Law passed the House, the Senate heard from Elizabeth Rosenberg, Assistant Secretary for Terrorist Financing and Financial Crimes, and Andrew Adams, Director of the KleptoCapture Task Force. at the Ministry of Justice. The hearing, held by the Banking, Housing and Urban Affairs Committee, addressed how cryptocurrency mixing services can be used to circumvent sanctions.
“When [sanctions] can serve as a deterrent to any criminal seeking to use a blender to launder their funds – the funds from the proceeds of corruption or other criminal activity – it is an effective way we can use to signal that we are not cannot tolerate money laundering,” Rosenberg said. “Whether it’s a Russian criminal actor, an Iranian, a North Korean or wherever he comes from.”
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