Under Crush Of Sanctions, Cryptocurrency Exchanges Rise In Russia

As the bite of US and European sanctions against Russian oligarchs takes hold – the country’s top billionaires have lost $80 billion in recent days – there are growing concerns that these elites are trying to circumvent sanctions by flocking to cryptocurrencies to fly under the radar.

And there are plenty of ways for panicked oligarchs to take advantage of the cryptocurrency trade to shift their funds to hide their enormous wealth, experts warn.

“Persons sanctioned by Russia could potentially try to use crypto to move rubles into crypto, then turn crypto into other currencies and use them,” said Ari Redbord, a former senior adviser to the department. of the Treasury, to the Daily Beast.

It’s not just Russian oligarchs who might turn to cryptocurrency as a safe haven.

Signs are mounting that ordinary Russians are turning to cryptocurrency companies for help as they watch their wealth dwindle before their eyes thanks to the ruble’s collapse, according to the crypto data analytics firm -Chainalysis currency shared with The Daily Beast.

“Since the invasion, there has been an increase in trading volumes for trading pairs involving the Russian rouble, with two peaks on 2/24 and 2/28,” the policy officer told The Daily Beast. Chainalysis North America Public Releases, Salman Banaei. .

Analysis of the cryptocurrency analysis company Kaiko found similar surges.

An official with knowledge of the mounting campaign to seize the assets of sanctioned tycoons told The Daily Beast that wealthy Russians have previously been observed meeting in bars, restaurants and clubs with long-time financiers in European economic capitals, likely playing their options on how to salvage their fortunes from Russia’s booming economy.

“Frankfurt, Geneva, London,” the official said, speaking in the background due to the sensitivity of the ongoing sanctions efforts. “Wherever a G&T costs $30, a Russian is considering his financial options.”

Fear that cryptocurrencies could provide Russian oligarchs with a way to evade harsh US sanctions is shaking the halls of Congress. The senses. Elizabeth Warren (D-MA), Mark Warner (D-VA), Sherrod Brown (D-OH) and Jack Reed (D-RI) on Wednesday sent a letter to Treasury Secretary Janet Yellen asking the Treasury Department to explain exactly how he will oversee cryptocurrency companies to ensure they enforce economic sanctions against Russian oligarchs.

On the same day, lawmakers sent the letter, Yellen said the Treasury will be on the lookout for circumvention of sanctions. “We will continue to review the operation of sanctions and assess whether or not there are leaks, and we have the opportunity to address them,” Yellen said in a speech at the University of Illinois at Chicago.

But officials are increasingly concerned that some of the oligarchs could get away with a cryptocurrency trickery anyway. The official familiar with the administration’s campaign to seize the assets of Russian oligarchs expressed deep frustration at the slow pace of potential Justice Department investigations in Europe, and growing concern that billions of sanctioned dollars could go missing in Ethereum as it takes the admin’s “Task Force KleptoCapture” to start capturing assets.

This interagency task force, first announced by President Joe Biden in his State of the Union address on Tuesday evening, has been granted sweeping powers to enforce sanctions and export restrictions. targeting the Kremlin’s billionaire allies.

“We join European allies in finding and seizing their yachts, their luxury apartments, their private jets,” Biden said to applause. “We come for your ill-begotten gains.”

United States Attorney General Merrick Garland overview of the launch of the working group Wednesday, pledging that Task Force KleptoCapture “would leave no stone unturned in our efforts to investigate, arrest and prosecute those whose criminal acts enable the Russian government to continue this unjust war.”

Nationally, at least, the task force is in its early stages of development, with a massive hiring drive in the FBI, US Marshals Service, Secret Service, Internal Revenue Service, and US Postal Inspection Service. . A Justice Department source familiar with the task force said the mood of its recruits was “damn thrilled”, but admitted the huge operation – in part red sparrowpart The man from the depot– would take time to set up.

Forensic accounting isn’t exactly something you can rush,” the DOJ source said.

So far, at least, cryptocurrency exchanges such as Binance, FTX, and Coinbase have said they will comply with US sanctions efforts. However, most prominent members of the industry stop short of implement total trade bansaccording to FinancialTimes.

Without a legal obligation, some cryptocurrency exchanges are reluctant to jump into the fray to freeze Russians outright, according to Jesse Powell, the CEO of cryptocurrency exchange Kraken.

Cryptocurrencies are “for peace, not war,” Powell said. “[I]If we were going to voluntarily freeze the financial accounts of residents of countries attacking and unjustly provoking violence around the world, the first step would be to freeze all US accounts. In practice, it’s not really a viable business option for us.

A Russian freeze, however, could be “imminent”, warned Powell.

Generally, sanctions compliance is a given for cryptocurrency exchanges — the Treasury Department took steps last year to clarify that sanctions compliance obligations also apply to virtual currencies.

But there are non-compliant organizations that the Russians are likely eager to contact before it’s too late, Redbord said.

The Ukrainian government has also started raising red flags over the current sanctions plans, fearing that the Russians will get away with their funds if cryptocurrency exchanges don’t ramp up and completely block Russians from trading. Ukrainian Deputy Prime Minister Mykhailo Fedorovwho is also the minister responsible for digital transformation, on Sunday called on all cryptocurrency exchanges to ban Russian users from taking advantage of their services.

“I ask all major crypto exchanges to block Russian user addresses,” Fedorov said. “It is crucial not only to freeze addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users.”

It is unclear whether the Biden administration will aim to pressure cryptocurrency exchanges to implement this type of freeze. So far, the administration has only named big banks and oligarchs in its sanctions plans, but a more comprehensive bloc of countries has yet to fall.

The Treasury Department did not return a request for comment.

Still, the Biden administration hasn’t been shy about cracking down on problem-causing cryptocurrency exchanges in recent months. The Treasury Department’s Office of Foreign Assets Control made its first designation of a cryptocurrency exchange last year when it imposed sanctions on SUEX – a Russian company – for aiding ransomware gangs with their payments. And while the sanctioning effort has focused on bringing Russian ransomware gangs to their knees, the move has paved the way for broader enforcement action against cryptocurrency exchanges if they inadvertently ignore or voluntarily, the policies of the Biden administration.

But going after the cryptocurrency exchange is not a clear issue. There are fears that ordinary Russian citizens, who are already seeing the value of their money depleted as their president invades Ukraine, will also feel the impact of the war, even as evidence emerges that many Russians do not support the war. Putin’s invasion.

And they could feel the burn if cryptocurrency entities also step up their crackdown on Russians’ use of cryptocurrency exchanges.

“This is not the Russian people’s war. It is becoming clearer by the day that the Russian people oppose it,” Secretary of State Tony Blinken said in a speech Wednesday. “So my message to the Russian people…is that we know that many of you do not want to participate in this war…​​ The economic costs that we have been forced to impose on Russia are not aimed at you. not, they aim to compel you to your government to stop its actions, to stop its aggression.

Even so, the scale of Russia’s losses in recent days cannot be resolved with cryptocurrency alone, warned Redbord, who advised both the assistant secretary and undersecretary for terrorism and financial intelligence. at the Treasury Department.

“There just isn’t enough liquidity in the entire cryptocurrency market to support what they’re losing here in terms of penalties – we’re talking hundreds of billions or more and the total market capitalization of the bitcoin… doesn’t come to that they’re going to lose here,” Redbord told The Daily Beast.

For now, however, authorities are on high alert. European authorities will monitor whether oligarchs attempt to circumvent sanctions using cryptocurrency, French Finance Minister Bruno Le Maire has said. noted at a press conference on Tuesday.

“We are taking action, including on cryptocurrencies or crypto-assets, which should not be used to circumvent financial sanctions,” Le Maire said. “We will take stock daily of the implementation of these sanctions, their effectiveness and any additional measures necessary. In terms of economic and financial sanctions, we want to remain flexible and mobilized.

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