US Lawmakers Discuss Crypto’s Role in Sanctions, National Security and Humanitarian Aid

Industry experts and lawmakers speaking at a hearing of the United States Senate Committee on Banking, Housing and Urban Affairs clashed over how the country should handle digital assets used for illegal purposes.

Michael Chobanian, the founder of Kuna crypto exchange and chairman of the Blockchain Association of Ukraine, spoke remotely at a hearing Thursday on “Understanding the Role of Digital Assets in Illicit Finance”, called from Binance. He claimed that the crypto exchange was “still working with the ruble” and suggested that the company is not complying with current sanctions against Russia, which has been involved in a military invasion of Ukraine since February 24.

In his written testimony, Chobanian said Kuna had cut “all support to the Russian ruble” in an effort to support Ukraine and weaken the economy of the country that is currently launching ground and air strikes on the country. Binance CEO Changpeng Zhao has previously said the exchange followed all sanctions rules, but a spokesperson added at the time that the company would not “unilaterally freeze millions of innocent users’ accounts” in Russia.

“To keep Russia on track and bring about a more democratic world with personal freedom through cryptocurrency, we are calling on crypto exchanges worldwide, including Binance, to block any interaction with sanctioned individuals until the fall of Putin’s regime and the end of aggression against Ukraine,” said Kuna’s founder.

Kuna founder Michael Chobanian addresses the Senate Banking Committee from a distance

Some lawmakers who attended the hearing opposed the idea that cryptocurrencies owned by wealthy Russians or Russian President Vladimir Putin could be used to circumvent existing sanctions. Senator Pat Toomey said there was “no evidence that Russia is using cryptocurrencies to evade sanctions in any significant way,” and their traceability makes digital assets risky for criminals to use for illegal transactions.

Discussions about Russia and Ukraine at the hearing represented two possible extreme cases of crypto use. On the one hand, some lawmakers suggested that a country like Russia could potentially use the technology to circumvent sanctions, as was the case for sanctions against Venezuela, Iran and North Korea. On the other hand, crypto transactions enabled Good Samaritans to quickly send money to Ukrainian people in need of food and military equipment for defense – Chobanian said it took just “about ten minutes” to set up crypto donations for Ukraine, while the National Bank of Ukraine took about ten days to arrange transfers in fiat.

Ransomware attacks have also been on the lips of lawmakers, given criminals’ apparent affinity for demanding payment in cryptocurrencies, including Bitcoin (BTC) to prevent the disclosure of sensitive information or restore access to critical systems. According to Jonathan Levin, co-founder and chief strategy officer of analytics firm Chainalysis, wallet addresses associated with illegal activity represented “only 0.15% of digital asset transaction volume in 2021,” which was also a record high. Authorities in the US were also able to track down and seize much of the funds from the May 2021 ransomware attack on the colonial pipeline.

“Ascribing cybercrime too much to cryptocurrency is missing critical causes and preventive measures that can be taken,” said Michael Mosier, former acting director of the Financial Crimes Enforcement Network.

Lawmakers and industry leaders have previously criticized government officials for not providing sufficient regulatory clarity in the crypto space. Republican Senator Cynthis Lummis said in December that she planned to introduce legislation that would provide a comprehensive framework for crypto, including providing clarity on the regulation of stablecoins and guidance for regulators to determine which tokens would be classified as different asset classes. categorized.

Related: Witnesses Discuss Crypto Mining Energy Impact at House Hearing

The Wyoming senator did not mention her bill at the hearing, nor did he… referenced it on her social media accounts since March 9, shortly after US President Joe Biden signed an executive order that will create a regulatory framework for crypto. However, Democratic Senator Elizabeth Warren said on Thursday that she had introduced a bill announced earlier this month aimed at tackling crypto as a way to avoid economic sanctions.

“The [best] what Congress can do is provide clarity,” Mosier said. “There are a lot of crypto companies that want to make sure they’re following the law, and I think there’s a lot of discussion, especially within the SEC and the CFTC, about exactly what it takes to be in compliance.”

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