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Yellen: ‘We Haven’t Seen Significant Evasion’ of Sanctions Using Crypto

Russian sanctions evasion with the means of digital assets has become the main concern for many policymakers recently. US Democratic Senator Elizabeth Warren warned a Senate committee hearing that the Russian elite could evade economic sanctions by converting their wealth to cryptocurrency. Treasury Secretary Janet Yellen questions whether the Russian elite will be able to use crypto at a massive scale unnoticed. Yellen mentioned that large transactions would be easily viewable on public blockchain explorers and spotted by private analytics firms.

This is evidenced by the work of such firms: Elliptic and Chainalysis, whose programs scours billions of blockchain accounts and transactions in a global hunt for illicit transactions and hidden assets. The industry’s position is that crypto won’t allow to get around financial restrictions because of the blockchain’s inherent transparency and traceability. Jonathan Levin, Chainalysis’ co-founder and CSO, affirmed that view: “For a country like Russia to move to a system like cryptocurrency, in order to move the majority of their economy onto these rails, is not something that can happen overnight.”. He expressed doubts that Russian oligarchs have sufficient level of familiarity and expertise in the field to remain undetected and keep control of the millions of dollars assets in crypto exchanges. Nevertheless, Yellen alleged during a hearing of the House Committee on Financial Services that they keep in view this backdoor for escaping sanctions. As crypto and the technology behind it continue to evolve, the fight against the use of a crypto in illicit transactions is “a cat-and-mouse game”. The United States and its allies have imposed several rounds of sanctions, including targeting the country’s largest businesses and individuals, since Russian forces invaded Ukraine on February 24. A determined number of people from the Russian elite, as well as entire industries, have been blacklisted from most European countries and the U.S. The sanctions, however, rely on the traditional banking system that is based on the “know-your-customer” rule and includes verifying clients’ identities. But when it comes to tracing economic activity, exchanges and other platforms that facilitate the buying and selling of cryptocurrencies and digital assets are rarely as good at de-anonymization as banks are.