Warren’s Struggle to Curtail Crypto Is Boosted by the Ukraine Conflict

In a July 2021 interview, Massachusetts Senator Elizabeth Warren compared cryptoregulation to the drug regulation initiatives of a century ago, which she says ended the sale of “snake oil” and laid the foundation for the creation of the modern drug industry. This echoed her previous statements about the digital currency market akin to the ‘Wild West’, making it a poor investment and an ‘environmental disaster’. With its latest bill in the Senate pipeline targeting Russian actors’ potential use of crypto to evade United States sanctions, it’s fair to ask: Is the military conflict in Ukraine just an excuse for Warren to act? to her long-standing aversion to digital assets?

From the Ivory Tower to Capitol Hill

Senator Warren is not your typical Democrat, having been a conservative for much of her life. The general idea behind many of the ideas she presents refers to the progressive era, when the traditional American middle class pitted itself against the well-lobbied interests of big business and turned to regulation to formalize the national economy.

A bankruptcy professor at Harvard Law School, she wrote several books that established her as a champion of the middle class and new financial regulation, and her ideas resonated during the subprime mortgage crisis that would culminate in the 2008 financial crisis.

That year, the United States Senate turned to Warren to chair the Congressional Oversight Panel, which oversaw the implementation of the Emergency Economic Stabilization Act, the infamous $700 million bailout package. This formed the basis for her entry into politics several years later, when she became a Massachusetts senator at age 63.

“As a member of the Senate Banking, Housing and Urban Affairs Committee, Senator Warren works on legislation related to financial services and economics, housing, urban development and other issues, and participates in overseeing federal regulatory agencies,” according to to her Senate website.

Only business regulations, nothing personal

A key takeaway from a review of Senator Warren’s resume is that the champion of financial regulation and tireless defender of the American middle class has never really been an anti-Russian hawk. However, this seemingly changed when Russian President Vladimir Putin launched his “special military operation” in Ukraine on February 24 and the US and its partners took punitive measures against the Russian economy.

The fact that Warren was able to deliver a comprehensive set of regulations targeting the crypto industry within weeks of the launch of the Ukraine conflict underscores that she probably drafted them well in advance and waited for the right time to reaching down the aisle for Republican approval.

Prior to the arrival of former US President Donald Trump on the Republican political scene, antipathy towards Russia was not viewed as partisan or confined to the Democratic Party. An overview of the Senate’s anti-Russia rhetoric, and who signed which documents, reveals it takes three forms.

The first are unanimous condemnations of Russia, which usually take place immediately after Russia takes an important political step against a foreign power such as Ukraine or Georgia.

The second type relates to allegations that Putin interfered in the 2016 US presidential election to ensure Trump’s victory. While most Republicans have dismissed the charge, it has remained a rallying cry for many Democrats. In his investigation into the case, former Federal Bureau of Investigation director Robert Mueller found that Russia made a systematic attempt to sway the election in Trump’s favor, but he stopped to determine whether the efforts were actually successful.

On the other hand, several Republican hawks are outspokenly anti-Russia, and these senators could play an important role in passing Warren’s legislation. While John McCain, arguably the most famous anti-Russian hawk, died in 2018, there are others, lesser known.

In December 2016, after Trump’s election, Senators Rob Portman of Ohio and Dick Durbin of Illinois, co-chairs of the Senate Ukraine Caucus, overthrew a bipartisan group of 12 Republicans and 15 Democrats. appeal to then-President-elect Trump to continue America’s “tradition of supporting the Ukrainian people in the face of Russian aggression”. While most of those senators are still in office, Warren was not among the signatories.

In March 2022, the Senate sentenced Russia twice. Both times, the resolution’s sponsor was Senator Lindsey Graham, the most ardent Republican anti-Russia hawk. While Warren voted for the resolutions, she was not among their many co-sponsors.

Civil forfeiture: An ugly precedent

There is precedent for what Warren is trying to do to curb crypto. For more than two decades, U.S. federal officials have confiscated black money from people at airports traveling to or from other countries. The official justification for the practice is that it restricts the sale of illegal narcotics. If officials find more than $10,000 in black money on someone, they are empowered to just take it, and getting it back can be a legal nightmare.

According to a July 2020 report of the civil liberties law firm Institute for Justice: “Law enforcement agencies routinely seize money from travelers at airports across the country using civil forfeiture — a legal process that allows agencies to take and keep property without owners ever committing a crime to charge, let alone secure a conviction.”

The sheer amount of cash taken at U.S. airports is mind-boggling: over $2 billion between 2000 and 2016. However, the report notes that 69% of the time, no arrests were made.

“The theory behind civil forfeiture is that by going after drug dealers’ money, you hit them where it hurts the most by taking their proceeds,” Jennifer McDonald, a senior research analyst at the Institute for Justice who wrote the report , told NPR in an interview in July 2020. “It is ineffective. There is research showing that civil forfeiture has nothing at all to do with reducing crime, or drugs for that matter.”

Warren’s legislation is also similar to the 2001 USA PATRIOT Act, which tightened both supervision and regulation of international banking, ostensibly to thwart the financing of terrorist activities. Title III prohibits US entities from collaborating with offshore shell banks unaffiliated with any bank on US soil, ostensibly to monitor suspicious activity abroad. The law required banks to investigate accounts owned by political figures suspected of past corruption.

It is noteworthy that while many later condemned the PATRIOT Act, its initial reception was positive among Republicans and Democrats alike because of the sense of urgency that prevailed after the September 11, 2001 terror attacks.

Excuses to target crypto?

Given its history, it is possible – perhaps even likely – that Senator Warren’s proposal is simply an excuse to target crypto, using Russia as a way to gain bipartisan support. In addition, Warren’s efforts may not be more effective in achieving her goals than civilian forfeiture in tackling the drug trade. According to Jake Chervinsky, head of policy at the Blockchain Association, the existing legislation targeting Russian entities is: Enough because crypto markets are too small and too transparent to save the effectively blocked Russian economy.

Transactions with Bitcoin (BTC) and the Russian ruble lack liquidity. Chervinsky also noted that “To make a meaningful difference, Russian SDNs [Specially Designated Nationals] should convert billions of dollars in rubles into crypto” and pointed out that Russia has already been cut off from most of the crypto industry. The nation may not even need to turn to crypto, given the willingness of China and India to pursue de-dollarization in trade, a process that has been years in the making.

So Senator Warren’s push for new crypto regulations appears to be just a thinly veiled attack on the industry. In an evenly divided Senate, her use of heavily sanctioned Russia seems like a possible excuse to rally bipartisan support for more restrictive measures.

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