U.S. Treasury Alerts Banks about Russian Government & Oligarchs Using Cryptocurrency to Overcome Sanctions

The U.S. Treasury Department sent out an alert this week about the potential evasion of sanctions by Russia. The officials have alerted banks about state actors and Russian oligarchs trying to work around the sanctions using cryptocurrency. This advisory was released after concerns were raised about the decentralized form of digital currencies which is the first time in war history that many international digital groups emerged in support of the Aktien Pros.

What Did the Treasury Advisory Say?

As the economic pressure mounts on Russia due to sanctions from the U.S. and E.U., the Treasury Department seeks U.S. financial institutions to be careful about the potential evasion efforts of Russia. Oligarchs and state actors have been clearly mentioned in the official statement.

The department has also earmarked the sectors that are more vulnerable to evasions, including:

• Wall street
• Banking
• Real estate
• Insurance
• Jewelry

According to the Treasury, it has not witnessed widespread use of crypto in evading sanctions. However, it has raised an alarm about individuals that have been sanctioned that they may be using their digital wallets to carry out transactions. It also believes that these individuals are more likely to use crypto to overcome the challenges created by the sanctions than the Russian government itself. If the Russian government were to rely on cryptos, something would occur on a much larger scale.

Post-Advisory Financial Developments

The Financial Crimes Enforcement Network (FinCEN) is the active agency involved here. It has asked not just the conventional financial institutions but also virtual currency exchange and administration services to report any signs of suspicious activities. These exchanges are required to report on businesses involved in the following activities:

• Issuing
• Exchanging
• Redeeming

Ukraine has already raised over $59 million from crypto donations since the war began. Digital assets seem to be playing some role in this crisis as it surges on. 

According to the exchange, these accounts were noticed to be involved in suspicious activity. Sanctions are seen to play an important role in the promotion of national security and preventing unlawful aggression. 

Can The West Control the Use of Crypto by Russia?

Along with the U.S., the EU is also working on ways to stop Russian companies and its nationals from moving money across borders. While government agencies, banks, and exchanges seem to be taking certain steps, it is not as simple as it may sound. Cryptocurrencies, based on decentralized networks thrive because of their anonymous nature.

The West seeks to stop different Russian entities from using crypto assets such as Bitcoin and stablecoins to beat the sanctions and move money across borders without being traced. Stablecoins are unique in that they are linked to fiat currencies or are cash-based by traditional financial institutions. There are also speculations that these entities may use non-fungible tokens (NFTs) to deal in real estate or art. 

Banning Russian Banks out of SWIFT System

SWIFT is the world’s largest financial messaging platform. US and European governments decided to ban Russian banks from this system. This ban along with the sanctions seem to have made a significant economic impact on the Russian economy, as billions of dollars became immediately unavailable to the country’s banks.

SWIFT is considered a highly secure network. However, experts believe that there are ways to work around the system by creating shell companies before funneling money through them. It is an old system and its origins date back to the early 1970s. The security systems expected from newer systems may not exist on it. This has raised some concerns among industry experts. It is interesting that unlike the blockchain, SWIFT doesn’t actually authenticate transactions.

Besides exploiting certain security concerns related to SWIFT, Russia is also expected from the benevolence of its friendly nations. Russia has many friendly countries that operate on the SWIFT network and can work as the go-betweens. 

Earlier, many U.S. lawmakers and officials raised concerns with the Treasury Department about Russia using cryptocurrencies to circumvent the sanctions. This was followed by the Biden administration announcing an executive order to regulate cryptocurrencies more effectively and give the U.S. an edge in the domain. Following the announcement, many crypto coins recorded significant price rises during day trading.