Warren bill would crack down on Russians’ use of bitcoin to evade Ukraine sanctions

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“Putin and his cronies can move, store, and hide their wealth using cryptocurrencies,” Warren said in a statement. “We can’t allow them to fund Russia’s war against Ukraine and to evade our economic sanctions by using crypto.”

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The legislation also would try to shine more light on the shadowy, largely unregulated world of cryptocurrency and virtual assets, whose hallmark is anonymity. It would require US taxpayers holding more than $10,000 worth of cryptocurrency offshore to report those holdings to the Treasury Department’s Financial Crimes Enforcement Network and directs that agency to issue rules requiring banks and cryptocurrency exchanges to submit reports, keep records and verify the identities of costumers who transfer those assets into private digital wallets.

Warren wrote the Digital Asset Sanctions Compliance Enhancement Act with Democratic senators Mark Warner of Virginia, Jack Reed of Rhode Island, and Jon Tester of Montana. A companion bill in the House will be introduced by Representative Brad Sherman, a California Democrat.

Warren has been an outspoken critic of cryptocurrency, which she believes lacks consumer protections, destabilizes the financial system and adds to global warming because of the huge amount of computing power required to digitally mine bitcoin, Ethereum and other forms of the virtual currency.

She and other members of Congress have increased their concerns after the US and its allies levied sweeping sanctions against Russia for invading Ukraine. North Korea and Iran have used cryptocurrency in recent years to evade sanctions on those countries, and Russian hackers have demanded ransom payments in cryptocurrency because it’s difficult to track.

“Right now, millions of transactions are taking place that are completely unregulated with no one verifying who gets what,” Warren told Federal Reserve Chairman Jerome Powell at a March 3 hearing. “And that means that while sanctions can make it very difficult for Russian companies, political leaders, and billionaires to move money around in the traditional financial system, there is another shadow, unregulated world that they can turn to.”

On March 2, Warren, Warner, Reed and Senate Banking Committee Chairman Sherrod Brown, an Ohio Democrat, wrote to Treasury Secretary Janet Yellen raising those concerns. Last fall, a Treasury report warned that cryptocurrency could be used to “reduce the efficacy of American sanctions” and a department official said this month that the Biden administration was monitoring how Russians are using the digital currency.

But it’s unclear if the bill will garner enough momentum to pass. Seven other senators, all Democrats, have signed on as cosponsors. Administration officials and industry experts have downplayed the potential to use cryptocurrency to allow Russia to hide or shift their money to significantly evade sanctions, which have been levied on its central bank, certain large companies, and oligarchs with ties to Putin.

Major cryptocurrency exchanges are subject to US and international bank secrecy and anti-money-laundering rules. And although cryptocurrency transactions are anonymous, those rules make it difficult to use the currency to make purchases without leaving digital footprints for regulators or law enforcement to track. Warren’s legislation would make it tougher by adding new requirements for US and foreign exchanges.

Jim Puzzanghera can be reached at [email protected]. Follow him on Twitter: @JimPuzzanghera.

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