The EU is looking to prevent the use of cryptocurrencies in order to avoid sanctions against Russia

The EU is looking to prevent the use of cryptocurrencies in order to avoid sanctions against Russia

The EU is considering new measures to ensure that digital assets are not used to evade sanctions against Russia, as the bloc tightens its enforcement of financial penalties imposed on Moscow last week.

EU finance ministers and other officials discussed on Wednesday the risk that cryptocurrencies could be used for circumvention sanctions, officials said.

Among those who called for action via video conference was Christine Lagarde, president of the European Central Bank. Bruno Le Maire, the French finance minister, said after the meeting that steps were being considered to “further increase the effectiveness” of sanctions and avoid any circumvention of measures – including through cryptocurrencies. The commission is now expected to consider proposals to address the issue.

The debate in Europe comes as lawmakers in the US and UK also expressed concern that crypto transactions could become a back door for moving money in and out of Russia, undermining Western efforts to isolate the country from the global financial system.

Many major crypto exchanges, including those based in offshore jurisdictions, have promised to comply with existing sanctions, but he resisted calls for a total ban on doing business with Russia. Several stock exchanges said broad restrictions would harm ordinary Russians and run counter to the libertarian ideology that established cryptocurrencies.

“If people want to avoid sanctions, there are always more methods,” Changpeng Zhao, Binance’s chief executive, told the BBC on Wednesday. “You can do it using cash, diamonds, gold. I don’t think crypto is anything special. “

During the call, Lagarde argued in favor of the law that companies that issue cryptocurrencies or provide services related to them should not deal with clients in Russia, say people familiar with the meeting. The goal, she argued, is to avoid using digital assets to circumvent sanctions and this week’s decision to exclude seven Russian banks from Swift.

In an earlier interview with the FT, Paolo Gentiloni, the EU’s economic commissioner, said authorities had noticed an increase in the use of cryptocurrencies in recent days, which he said could “be a way to circumvent measures taken to freeze assets in Russia.”

In the U.S., a group of Democrats from the Senate’s influential banking committee wrote a letter to Janet Yellen, the finance minister, expressing concern that cryptocurrency could be used to evade sanctions.

“Strong enforcement of sanctions compliance in the cryptocurrency industry is critical as digital assets, which allow entities to circumvent the traditional financial system, can increasingly be used as a tool to evade sanctions,” wrote senators, including Sherrod Brown of Ohio. panel chair, Mark Warner of Virginia and Elizabeth Warren of Massachusetts.

Deputies said they were concerned that the Office of Foreign Assets Control, a branch of the Treasury that oversees U.S. sanctions policy, “has not developed strong enough and efficient enforcement procedures in the cryptocurrency industry.”

The US Treasury Department declined to comment on the letter, but the US official noted that it would be difficult for Russia and its wealthy individuals to use cryptocurrencies in a significant way to avoid sanctions.

“You can’t run the G20 economy on a cryptocurrency. “Big banks in the economy need real liquidity, and performing large transactions in virtual currency will probably be slow and expensive,” the official said.

British lawmakers have also responded to the risk that cryptocurrencies are being used to evade or undermine sanctions. “We are considering how the United Kingdom, together with its allies, can prevent cryptocurrencies from emerging as holes to evade sanctions,” Baroness Penn, a government whip, told the House of Lords on Wednesday.

British MP Tom Tugendhat, chairman of the Foreign Affairs Committee, and Tory counterpart Lord Sarfraz wrote to the Financial Conduct Authority this week, urging the regulator to issue new guidelines to crypto companies on the sanctions regime. “There is still a significant risk that Russian individuals and entities sanctioned last week will continue to trade cryptocurrency assets,” they said.

The FCA said it had “accessed every crypto company registered with us to ensure they are aware of the sanctions and their responsibilities” and that it was “working with partners to actively monitor these companies”. “We have made it clear to crypto companies, banks and others that we expect them to focus on sanctions control and that, with our partners, we will monitor their actions.”

Additional reporting by Elena Varvitsioti and Martin Arnold and Laura Noonan in London

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