Senator Elizabeth Warren introduced a bill on Thursday aimed at enforcing U.S. sanctions in the global cryptocurrency industry. The bill, called the Digital Asset Sanctions Compliance Enhancement Act, would implement measures criticized as generally unnecessary and unconstitutional by industry advocates.
The role of cryptocurrency firms in enforcing sanctions has been hotly debated since Russia's invasion of Ukraine began. Major cryptocurrency exchanges with U.S. operations all say they are enforcing existing sanctions against specified people and entities—Coinbase touted that it currently blocks 25,000 Russian addresses—while at the same time rebuffing a request from Ukraine to place a blanket ban on all Russian users.
Industry experts and U.S. officials have said that the risk of sanctioned oligarchs laundering billions of dollars using cryptocurrency is low due to the transparent nature of blockchains and the existence of firms well-equipped to trace criminal actions. During a Thursday Senate hearing on crypto and sanctions evasion, Jony Levin, co-founder of blockchain analysis firm Chainalysis—which works with the government and law enforcement—told Warren "no" when asked if techniques like chain-hopping and mixing made it easier to hide transactions.
Still, Warren and other lawmakers have been raising the alarm about the possibility of cryptocurrencies being used to evade sanctions at scale, a position that was fueled by unconfirmed reports from anonymous sources in the UAE that told Reuters they received calls from people purporting to be Russians looking to offload billions in crypto. (Many observers were skeptical of this.)
So, what's in the proposed Act? There's a few main points: Requiring the president to identify foreign people or firms that are facilitating sanctions evasion and sanctioning them; giving the Treasury the power to block U.S.-based actors from interacting with addresses that "are known to be, or could reasonably be known to be, in Russia"; requiring U.S. taxpayers to report transactions greater than $10,000; and requiring the Treasury to produce a report on foreign firms that are "high risk" for facilitating sanctions evasion.
Washington, D.C.-based think tank Coin Center described the bill as "unnecessary, overbroad, and unconstitutional" in a blog post.
The bill's current wording counts anyone involved in developing "any communication protocol, decentralized finance technology, smart contract, or other software, including open-source computer code", as being a "digital currency transaction facilitator." Open-source software covers a lot of ground, and could conceivably include anyone who's contributed to Bitcoin's code, for example. Coin Center argues that this risks putting a target on the backs of innocent people, writing that "it is blatantly unconstitutional under the First Amendment to forbid the publication of open source computer code.”
Coin Center also bristled at the idea of giving the government power to compel exchanges to block all Russian users, echoing concerns that this would hurt, not help NATO's mission. "This proposed legislation is dangerously overreaching and opportunistic," the blog states. "It will do nothing to improve sanctions against the Russian war machine and may even increase the Russian government’s ability to isolate and control those within their borders who do not support the war."
It's unclear how much support the bill will have. It was cosponsored by a laundry list of Democrat lawmakers—Senators Tammy Duckworth, Debbie Stabenow, Raphael Warnock, Chris Van Hollen, Tina Smith, Catherine Cortez Masto, and Bob Menendez—but the cryptocurrency industry has found vocal support among GOP lawmakers like Texas Senator Ted Cruz.
"It is not time to call Congress. This is not a moment to pull the red alert lever. This bill, as it stands, so obviously lacks support that it likely won't move. Let's not cry wolf," Coin Center executive director Jerry Brito tweeted.
When reached for comment, Elizabeth Warren's office directed Motherboard to a page with prepared comments and the text of the bill.
“Putin and his cronies can move, store, and hide their wealth using cryptocurrencies, potentially allowing them to evade the historic economic sanctions the U.S. and its partners across the world have levied in response to Russia’s war against Ukraine. I'm glad to introduce the Digital Asset Sanctions Compliance Enhancement Act with my colleagues to strengthen our sanctions program and close off any avenues for Russian evasion,” Warren said in a statement.