Anti-banking and vehemently anti-crypto Senator Elizabeth Warren is back on her warpath to eradicate the digital asset industry. In her latest move, the staunch critique of cryptography is preparing legislation.
He hopes this will make it more challenging to use cryptography to circumvent sanctions. The proposed legislation, which is still in draft form, aims to impose secondary sanctions on foreign cryptocurrency exchanges that have failed to comply with those set by the United States.
According to NBC News, the bill seeks to force companies to choose between doing business in the United States or with sanctioned individuals and organizations.
An extreme scenario could see US citizens excluded from using international cryptocurrency exchanges such as Bitcoin system. However, due to the tough regulatory climate in America, many of them have already self-imposed restrictions and limits on US customers.
The curse of cryptocurrencies
Warren and several other senators wrote to Treasury Secretary Janet Yellen last week urging more action against the use of cryptocurrencies.
"Strong enforcement of sanctions compliance in the cryptocurrency sector is critical, as digital assets, which allow entities to bypass the traditional financial system, can increasingly be used as a tool for sanctioning evasion."
Senator Lindsey Graham joined the call for a crackdown on cryptocurrencies last week, stating:
"Cryptocurrency is showing its ugly head here, as it sanctions the [Russian] central bank, which is a good thing, I worry about how the Russians might use the cryptocurrency to stay afloat."
Warren's proposal also seeks to make it easier to verify the identity of those who use private cryptocurrency wallets to make transfers. It would require financial institutions to keep detailed records for submission to the Treasury Department.
Such harsh tactics may not be necessary, however, at least according to the Treasury Department's Financial Crimes Enforcement Network (FinCEN). It stated this week that:
"While we have not seen widespread evasion of our sanctions using methods such as cryptocurrency, prompt reporting of suspicious activity contributes to our national security and our efforts to support Ukraine and its people."
The European Union is also looking to include cryptocurrencies in its tightening of sanctions.
No, Russia will not turn to cryptocurrencies
It has been widely reported and now generally accepted that Russia will not turn to cryptocurrencies to evade sanctions on its financial network. There is not enough liquidity in the cryptocurrency markets to serve Russia's massive forex markets. Furthermore, digital assets are too volatile to be used as a currency.
In addition, Russia has vast reserves of gold and Chinese currency that it can turn to. It has already strengthened ties with China to circumvent financial sanctions imposed by the West, so perhaps US senators should look there instead.