Russia May Use Cryptocurrency to Evade Sanctions
In response to the economic sanctions being imposed by a number of countries on various Russian entities, these entities reportedly are looking to mitigate their impacts by making deals with anyone eager to work with them. In turn, these Russian entities can use cryptocurrencies to bypass the controls that the governments imposing sanctions are relying upon, particularly transfers of money through the traditional banking system.
«Russia has had a lot of time to think about this specific consequence,» observes Michael Parker, a former U.S. federal prosecutor who now heads the anti-money laundering (AML) and sanctions practice at the Washington law firm Ferrari & Associates. "“It would be naïve to think that they haven't gamed out exactly this scenario," he adds.
Sanctions are an especially powerful diplomatic tool for the U.S. because the U.S. dollar is the world's reserve currency and is the most widely used medium of exchange and medium for cross-border payments across the globe. However, U.S. government officials have become increasingly aware that cryptocurrencies can be used instead to lessen the impact of sanctions. As a result, these officials are increasing their scrutiny of digital assets.
An effective sanctions program relies on the global financial system, particularly banks, to provide enforcement. These institutions track the movement of money, and anti-money laundering laws require them to block transactions involving entities that have been sanctioned and to report what they observe to authorities. The explosion of digital currencies, however, allows sanctioned entities to skirt the banking system and thus to complete transactions unseen by the monitoring apparatus that banks provide.
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