Senator Elizabeth Warren introduced legislation aimed at Russian cryptocurrency users, which could force exchanges to take greater action in the future. Although the ramifications of the bill’s text are concerning, several industry players believe it is premature to raise the alarm.
During a Senate Banking Committee hearing on March 17, Warren sponsored the “Digital Asset Sanctions Compliance Enhancement Act.” It proposes that the Treasury be given additional jurisdiction to prohibit crypto service providers from interacting with any addresses linked to Russia, as well as sanction anyone determined to have materially benefited or supported a sanctioned person. If the government uses these enhanced powers, the broad language employed in these provisions could result in a number of unexpected service providers being penalised.
For much of the sector, the bill’s exact language is the biggest sticking point. In an interview, Mark Wetjen, former acting chairman of the Commodity Futures Trading Commission and current head of policy and regulatory strategy at FTX, noted that definitions are always important in digital asset legislation, and Warren’s bill is no exception. As the crypto policy think tank Coin Center noted, this broadens the bill’s scope to include not only exchanges, but also technologists, decentralised financial protocols, unhosted wallets, open-source software developers, and others.
Some individuals who may be caught in the crossfire of this terminology, such as those who publish open-source code, may not even realise or be able to determine that their tools are being used for sanctions evasion.
According to Coin Center, it could even be unconstitutional. According to the think tank, the language might give the President the authority to prohibit the release of open source code, which would be unlawful as a breach of the First Amendment. In a blog post, it described the law as “dangerously overreaching and opportunistic.” According to industry players, exchanges are already complying with existing penalties, and there’s little evidence that crypto is being used for sanctions evasion any more than traditional banking methods.
This lack of evidence, as well as the improved capabilities of blockchain technology to resist sanctions evasion, were highlighted by Thomas Hook, Chief Compliance Officer at crypto exchange Bitstamp.
