At Hearing, Senator Warren Says “Crypto Takes the Sting Out of Sanctions” and Calls for “Cracking Down on Crypto” to Hold Russia Accountable for its Aggression
Yesterday, Warren, Warner, Brown, Reed Expressed Concerns to the Treasury Regarding the Potential Use of Cryptocurrency to Evade Sanctions, which have become even more urgent amid the sanctions imposed on Russia after its invasion of Ukraine.
Warren also called out BHUA Committee Republicans for refusing to show up and vote on five nominees to the Fed: “Any Republican talking today about the risks facing our economy should be willing to show up and vote on the Fed nominees.”
Washington, D.C. – During a hearing of the Senate Banking, Housing, and Urban Affairs (BHUA) Committee, United States Senator Elizabeth Warren (D-Mass.) warned that cryptocurrency may allow Russia to dodge sanctions following its invasion of Ukraine and urged stronger regulation of the crypto market to ensure that countries, drug traffickers, cyber criminals, and tax cheats can’t evade economic pain.
While sanctions can make it difficult for Russian companies, political leaders, and billionaires to move money around in the traditional financial system, cryptocurrency allows individuals to conduct financial transactions that bypass traditional financial intermediaries like banks. The cryptocurrency industry is responsible for enforcing sanctions, but many crypto exchanges and wallets are not collecting information about the identities of their customers, screening their platforms for illicit activity, or reporting sanctions violations.
Senator Warren also called out Republicans on the BHUA committee for refusing to show up and vote on five nominees to the Federal Reserve: “They refuse to do their job. This is shameful—and it is risky. Any Republican talking today about the risks facing our economy should be willing to show up and vote on the Fed nominees.”
Yesterday, Senators Warren, Mark Warner (D-Va.), Sherrod Brown (D-Ohio), and Jack Reed (D-R.I.) expressed concerns to Treasury Secretary Janet Yellen regarding sanctions compliance among the crypto industry. She has also been calling on regulators to “clamp down” on stablecoins and decentralized finance (DeFi) platforms “ before it is too late.” She has argued that high and unpredictable fees in crypto present severe risks to investors who have the least money to lose. Securities and Exchange Commission (SEC) Chair Gensler has also affirmed to Senator Warren on the need to regulate cryptocurrency exchanges and protect investors and our financial system.
Transcript: The Semiannual Monetary Policy Report to
U.S. Senate Banking, Housing, and Urban Affairs Committee
Thursday, March 3, 2022
Senator Elizabeth Warren: Our country is trying to enforce strong sanctions against Russia, weather the potential economic fallout of the Ukraine crisis, and address the pandemic-related inflation and corporate price gouging that is hurting American families.
Much is at stake for our country. But Republicans on this committee refuse to show up and vote on five nominees to the Fed. They refuse to do their job. This is shameful—and it is risky. Any Republican talking today about the risks facing our economy should be willing to show up and vote on the Fed nominees.
So, let’s talk about one of those risks, Mr. Chairman. As Russia has invaded Ukraine, the centerpiece of the U.S. response is economic sanctions. The U.S. and its allies have rolled out some of the strongest economic sanctions in history, severely restricting Russia’s access to the global financial system by sanctioning the biggest banks and companies; by kicking Russian banks out of SWIFT, the international payments messaging system; and by freezing the Russian central bank’s foreign reserves.
Now these sanctions are powerful, but Russia can dodge some of this pain by using the same cryptocurrency tools that are currently used by drug traffickers, cyber criminals, and tax cheats.
I’ll pick one example here. We’ve all become familiar with ransomware, where a cybercriminal infects someone’s computer system, locks it up, then demands payment in order to unlock the system. And how do they get paid? Through unregulated cryptocurrencies like bitcoin.
Chair Powell, you know-- do you know who cybersecurity experts say is the world leader in ransomware attacks and in getting paid through cryptocurrencies that allow them to obscure and hide their trails?
Chair Jerome J. Powell: I could guess, but I--
Senator Warren: You want to make a guess here? Based on what we're talking about today? It’s Russia. You know, if you listen to our own national security agencies, the answer is Russia. And that’s why when President Biden held an international summit last year to fight ransomware, Russia -- the biggest source of the problem -- was intentionally not invited.
According to one estimate by the blockchain analysis company Chainalysis, Russia-linked actors collected nearly three quarters of all ransomware revenue in the world last year. And hundreds of millions of crypto dollars are collected in Moscow each quarter. As much as half of those come from illicit crypto wallet addresses. Russia is the world’s expert on moving money outside legal channels.
So, Chair Powell, obviously, you do not administer sanctions, but you are an expert on the international financial system. So I just want to take a look at this. Are other countries currently using cryptocurrencies to evade sanctions? I’m thinking here of North Korea, Iran, Venezuela.
Chair Powell: I-- Honestly, it’s not something we’re responsible for. I-- I mean I have read it. I have read publicly that those things have happened. Though, yes.
Senator Warren: Well, the Treasury Department, the Department of Justice, the United Nations, and the IMF all say that the answer is yes.
Crypto takes the sting out of sanctions. In fact, the Treasury Department warned last year that crypto could undermine our sanctions regime.
Theoretically, the crypto industry is supposed to enforce sanctions as well.
So, let me ask. Chair Powell, is the crypto industry enforcing sanctions right now?
Chair Powell: So, what I’ve read. Again, we don't-- this is really for the Treasury Department, but I’ve read the same things you have and that you have in your letter which is that some reluctance expressed on the part of the crypto industry to do that.
Senator Warren: Alright. They are supposed to, but the problem is they haven’t been doing a very good job. Just read the Treasury Department’s Sanctions Review, or the UN reports on sanctions compliance. We know that many crypto exchanges and wallets are not collecting information about the identities of their customers, are not screening their platforms for illicit activity, and are not reporting sanctions violations.
Heck, this is how North Korea has been able to move money around and finance its illegal missile programs.
Here’s the thing: the whole point of crypto is that it allows someone to conduct financial transactions without having to go through the traditional banking system or traditional financial intermediaries. Right now, millions of transactions are taking place that are completely unregulated with no one verifying who gets what.
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.
Crypto poses a variety of threats – to financial stability, to investor protection, to our environment. But crypto is also providing a new way for countries to sanction-proof themselves. Cracking down on crypto is a critical piece of holding Russia accountable for its aggression. We can’t fool around any longer. We need to get new crypto rules in place.
Thank you, Mr. Chairman.
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