European Commission - Laws to stop VASPs evading sanctions

Sanctioned Russians and their companies could use cryptocurrencies to evade international sanctions, according to EU finance ministers.

On a video call on Wednesday, the ministers agreed to crack down on cryptocurrency as they assessed the war's economic consequences.

"We are taking measures, in particular on cryptocurrencies or crypto assets, which should not be used to circumvent the financial sanctions decided upon by the 27 EU countries," French Economy and Finance Minister Bruno Le Maire said later.

One of those on the call, ECB President Christine Lagarde, pushed for more action against crypto sanctions evasion.

The European Commission will now be tasked with considering solutions to the problem.

The United States and the United Kingdom are also concerned that cryptocurrencies such as Bitcoin and other cryptocurrencies will be used to circumvent the sanctions imposed on Vladimir Putin's inner circle, his and Belarus' generals, Russia's banks and key companies.

Meanwhile, sources told AML Intelligence that ECB President Lagarde supports legislation that prohibits companies involved in the issuance of crypto assets or providing services related to them from dealing with Russian clients.

Some of the larger VASPs, including those based in offshore jurisdictions, have pledged to comply with existing sanctions, but have resisted calls for a blanket ban on doing business with Russia.

Several exchanges claimed that the restrictions would harm ordinary Russians and go against the founding libertarian ideology of cryptocurrencies.

"If people want to avoid sanctions there’s always multiple methods," Binance CEO Changpeng Zhao claimed.

"You can do it using cash, using diamonds, using gold." He went on to say, "I don’t think crypto is anything special."

Separately, EU Economic Commissioner Paolo Gentiloni said in an interview with the Financial Times that authorities have noticed an increase in the use of cryptocurrencies in recent days, which he said "could be a way to bypass the measures taken to freeze the assets in Russia."

In the United States, a group of Democrats on the Senate Banking Committee wrote to Treasury Secretary Janet Yellen, expressing their concern that cryptocurrency could be used to evade sanctions.

"Strong enforcement of sanctions compliance in the cryptocurrency industry is critical given that digital assets, which allow entities to bypass the traditional financial system, may increasingly be used as a tool for sanctions evasion," wrote the senators, who included Ohio's Sherrod Brown, Virginia's Mark Warner, and Massachusetts' Elizabeth Warren.

In the United Kingdom, Conservative MP Tom Tugendhat, the chair of the foreign affairs committee, wrote to the Financial Conduct Authority (FCA) requesting new sanctions guidance for crypto firms.

"There remains a considerable risk of Russian individuals and entities sanctioned last week, continuing to trade in cryptocurrency assets," they said.

The Financial Conduct Authority (FCA) said it had "reached out to each crypto firm registered with us to ensure that they are aware of sanctions and their responsibilities" and was "working with partners to actively monitor these firms."

"We have made it clear to crypto firms, banks and others that we expect them to focus on their sanction controls and, with our partners, we will be supervising their actions."

By fLEXI tEAM