Crypto Tech
Cryptocurrencies are digital currencies that use blockchain technology to record and secure every transaction. A cryptocurrency (for example, Bitcoin) can be used as a digital form of cash to pay for everything from everyday items to larger purchases like cars and homes.
Blockchain is the technology that enables the existence of cryptocurrency (among other things). Bitcoin is the name of the best-known cryptocurrency, the one for which blockchain technology was invented.
Global Sanctions
HireRight Global Sanctions Enforcement Check (GSEC) searches a source containing information from over 1,800 U.S. and international regulatory enforcement authorities, sanctions bodies, law enforcement agencies, and financial regulators.
The First Advantage Global Sanctions Search is a multi-source search that helps organizations easily reduce risk and promote a safe, secure workplace by assisting with compliance guidelines mandated by the Office of Foreign Assets Control (OFAC), the USA PATRIOT Act, and other regulatory requirements.
United State-Based Crypto Exchanges
The United States-based crypto exchange Coinbase has proposed the use of cryptocurrencies to help ensure compliance with economic sanctions. The recommendation comes along with highlighting the ease of laundering and sanction evasion of fiat currencies made possible by traditional financial infrastructures.
Written by Coinbase’s Chief Legal Officer Paul Grewal, the blog talks about the growing range of global sanctions put forth amid the Russia-Ukraine conflict. The crypto exchange supported the government’s decision to impose sanctions on individuals and territories, highlighting its importance in “promoting national security and deterring unlawful aggression.”
Traditional Financial Institutions
Grewal points out that, despite the sanctions put forth by governments over the years, laundering of fiat currency through traditional financial institutions remains the most sought-after method for sanction evasion:
“By transacting through shell companies, incorporating in known tax havens, and leveraging opaque ownership structures, bad actors continue to use fiat currency to obscure the movement of funds.”
On the other hand, Grewal argued that digital asset transactions are inherently public, traceable, and permanent — an important feature that can be leveraged by governing authorities to detect and deter evasion.
Cryptocurrencies to Evade Sanctions
In addition, prominent crypto lawyer Jake Chervinsky also highlighted why governments can’t make use of cryptocurrencies to evade sanctions. Acknowledging the same, Grewal stated that actors who intend to counteract sanctions would require “virtually unobtainable amounts of digital assets,” adding:
“As a result, trying to obscure large transactions using open and transparent crypto technology would be far more difficult than other established methods (e.g., using fiat, art, gold, or other assets).”
Some of the proactive measures taken by Coinbase to implement a global sanction program include blocking access of flagged entities during the signup process, detecting evasion attempts, and anticipating threats using a sophisticated blockchain analytics program.
Bitcoin Sanctions: United States
Moreover, other crypto businesses have started taking measures to further deter the use of cryptocurrencies based on the sanctions recommended by the United States government. For example, Satoshi Labs, a Prague-based crypto wallet provider, announced to stop shipping crypto wallets into Russia. Satoshi Labs spokesperson Kristýna Mazánkov said that while Bitcoin (BTC) is apolitical, the move to restrict the shipment of crypto wallets in Russia was made as “company employees have connections to the conflict that make it personal.”
In addition to helping law enforcement track suspicious activity over a transparent blockchain, cryptocurrencies play a vital role in protecting the privacy of individuals — a principle that exists within the traditional financial system. Grewal concluded:
“We believe we can balance these interests by continuing to support law enforcement efforts while promoting policy frameworks that respect individual privacy.”
Blockchain-Based Technology: New York
In the first week of March, the New York State Department of Financial Services (DFS) announced the implementation of a blockchain-based technology to further enforce ongoing global sanctions.
As Cointelegraph reported, the DFS plans to expedite the procurement of additional blockchain analytics technology to help identify Russian individuals and entities tied to DFS-licensed virtual currency businesses.
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