On March 17, Senators Elizabeth Warren (D-MA), Jack Reed (D-RI), Mark Warner (D-VA), and Jon Tester (D-MT) introduced the Digital Asset Sanctions Compliance Enhancement Act (Act) in an attempt to ensure blacklisted Russian individuals and businesses do not use cryptocurrency to evade economic sanctions.
“In order for the sanctions levied by the United States and our allies to have the maximum impact on Vladimir Putin and his oligarch friends, we must close off avenues they might use to evade those sanctions. This legislation will crack down on foreign actors who help sanctioned Russians use digital assets like cryptocurrencies to circumvent the crippling measures we’ve put in place to punish Russia for its barbaric invasion of Ukraine,” said Senator Warner.
The Act would do the following:
- Require President Joe Biden, within 90 days of the Act’s passing, to submit a report to Congress, identifying foreign persons that operate a digital asset trading platform and are facilitating the evasion of the sanctions against Russia. It allows the President to block all transactions subject to evasions within the U.S.
- Allow the Secretary of the Treasury to require that no digital asset trading platform be used to transact with cryptocurrency addresses known to be or may be affiliated with Russia.
- Require the Financial Crimes Enforcement Network (FinCEN) to mandate that U.S. taxpayers engaged in offshore transactions over $10,000 of cryptocurrency file FinCEN Form 114 (FBAR).
- Necessitate the Secretary of the Treasury to submit reports on implementing the provisions of the Act and any additional resources the Treasury Department may need.
- Require the Treasury Department to issue a public report, identifying foreign digital asset trading platforms determined to be high risk for sanctions evasion, money laundering, or other illicit activities.
The bill does not come without controversy. The current version of the Act states that “the term ‘digital asset transaction facilitator’ means — any person, or group of persons, that significantly and materially facilitates the purchase, sale, lending, borrowing, exchange, custody, holding, validation, or creation of digital assets on the account of others, including any communication protocol, decentralized finance technology, smart contract, or other software, including open-source computer code.” Policy group Coin Center stated, “The bill would place sweeping restrictions on persons who build, operate and use cryptocurrency networks even if they have no knowledge or intent to help anyone evade sanctions.” Coin Center cited FBI director Christopher Wray’s statements at a Senate Intelligence Committee hearing: “The Russians’ ability to circumvent the sanctions with cryptocurrency is probably highly overestimated on the part of maybe them and others. We are, as a community and with our partners overseas, far more effective on that than I think sometimes they appreciate.”
During the Senate Committee on Banking, Housing, and Urban Affairs hearing on March 17 on “Understanding the Role of Digital Assets in Illicit Finance,” Senator Pat Toomey (R-PA) agreed with the witnesses who testified that U.S. officials have not found evidence of widespread Russian sanctions evasion via cryptocurrencies thus far, but he noted that Ukraine has been using cryptocurrencies to raise tens of millions to support its military.