Targeting the country’s access to cryptocurrencies, such as bitcoin and ether, would take the sanctions policy into uncharted territory. Blocking transactions would be difficult, as by nature private digital currencies are designed to exist without borders and mostly outside the government-regulated financial system.
The Biden administration is in the early stages of exploring the region, with the goal of disrupting economic activity in the country, The Wall Street Journal reported on Friday, citing an administration official. Sanctions against Russian crypto activities should be designed in a way that does not destroy the broader crypto market, which could make imposing them difficult, the official said.
Steps taken by regulators in recent years to better monitor crypto transactions could give governments leverage, for example, to instruct exchanges and crypto brokers to block transactions in certain countries or with certain government-issued currencies, such as the rouble.
The US Treasury Department’s sanctions cop, the Office of Foreign Assets Control, will likely crack down on crypto exchanges and other digital currency platforms that violate bans on transactions with blacklisted Russian banks such as than the two largest in the country, VTB and Sberbank, said Ari Redbord, a former senior Treasury Department official now at blockchain analytics firm TRM Labs.
There are precedents for pursuing cryptographic activity. Russian cryptocurrency exchanges blacklisted by the SUEX OTC and Chatex administration in September for allegedly helping to launder ransomware payments.
“OFAC could also go after larger Russian stock exchanges in the same way it has already singled out traditional Russian financial institutions,” Redbord said. This would prohibit US exchanges or other exchanges that exchange dollars for crypto from engaging with the US financial system.
Cryptocurrencies make up a larger part of Russia’s financial system than most other countries due to a mistrust of its banking system, said Marlon Pinto, director of investigations at risk consultancy AnotherDay. based in London. A Russian government report estimates that there are more than 12 million cryptocurrency wallets, where digital assets are stored, opened by Russian citizens, and the amount of funds is around 2 trillion rubles, or approximately $23.9 billion.
Russia is the third-largest country for bitcoin mining, the energy-intensive and mathematically complex process by which new bitcoins are harvested, according to August 2021 data from the University of Cambridge.
The Russian government has a hot and cold attitude towards cryptocurrencies. The country’s central bank proposed a ban on cryptocurrency operations last month, calling for a ban on the issuance and operations of cryptocurrency, preventing banks from investing in it, and blocking the exchange of cryptocurrency. crypto against government-backed currencies. The central bank has also called for a ban on cryptocurrency mining.
Still, President Vladimir Putin said in January that Russia had “certain competitive advantages” with it when it comes to excess electricity and a skilled workforce. The Russian Ministry of Finance has submitted draft regulations to the government that would allow residents to invest in cryptocurrencies through licensed entities, while capping the amount. rubles they could invest. The lingering dispute prompted Mr Putin to publicly call for a compromise last month.
One of the motivations for targeting cryptocurrencies is that they could potentially be used to circumvent other sanctions that focus on the traditional banking and payment system.
Iran, which faces tough sanctions from the United States that has limited its access to global financial markets, has used cryptocurrency mining to circumvent sanctions, according to analytics firm Elliptic.
Like Russia, Iran is a major oil producer, allowing it to use that fuel to fuel bitcoin mining and harvest the digital currency in exchange, using it to buy imports. This allows Iran to avoid sanctions on payments through Iranian financial institutions.
Enacting cryptocurrency sanctions would be difficult, analysts say. Major cryptocurrency exchanges operate with regulators who request information about customers and suspicious transactions. But peer-to-peer cryptocurrency transactions that don’t have a central intermediary are growing in popularity.
Ian Talley contributed to this article.
This story was published from a news agency feed with no text edits
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