Sen. Warren Announces Sanctions Compliance Bill for Crypto Companies

U.S. Sen. Elizabeth Warren (D-Mass.) announced Thursday a new bill to block cryptocurrency companies from conducting business with sanctioned companies.

The Digital Assets Sanctions Compliance Enhancement Act, introduced with Sens. Jack Reed (D-R.I.), Mark Warner (D-Va.), Jon Tester (D-Mont.) and others, would allow the U.S. president to add non-U.S.-based crypto companies to sanctions list if they support sanctions evasion.

"This is a bill that would authorize the president to sanction foreign cryptocurrency firms that are doing business with sanctioned Russian entities and authorize the Secretary of Treasury to act," she said.

According to a draft of the bill, the presidential administration would be tasked with identifying "any foreign person" who operates a crypto exchange or otherwise facilitates digital asset transactions who has also supported sanctions evasion by Russian individuals named to the Office of Foreign Asset Control's sanctions list.

Moreover, the U.S. president could sanction these exchange operators unless there was a national security interest in not doing so.

The U.S. Treasury secretary could also require that crypto exchanges operating in the U.S. not conduct transactions for, or otherwise work with, crypto addresses belonging to people based in Russia if this is deemed to be in the national interest. The Treasury secretary would have to report to Congress about this decision.

The bill seems to extend beyond just Russian sanctions. Another provision would authorize the Financial Crimes Enforcement Network (FinCEN) to identify users transacting with more than $10,000 in crypto.

"Not later than 120 days after the date of enactment of this Act, the Financial Crimes Enforcement Network shall require United States persons engaged in a transaction with a value greater than $10,000 in digital assets through [one] or more accounts outside of the United States to file a report," the bill said.

The Treasury secretary would also be tasked with identifying exchanges that could be at "high risk for sanctions evasion" or other crimes, and reporting these entities to Congress.

"Any exchange included in the report may petition the Office of Foreign Assets Control for removal, which shall be granted upon demonstrating that the exchange is taking steps sufficient to comply with applicable United States law," the bill said.

Warren announced the bill during a hearing of the Senate Banking Committee on how crypto might be used for illicit finance.

Prior to the announcement, Warren asked Chainalysis' Jonathan Levin about how easy it might be for Russian oligarchs to evade sanctions using cryptocurrency.

Levin, responding to a hypothetical put forward by Warren, said it would be difficult for an oligarch to hide even relatively small sums of money ($100 million worth) because of the different blockchain tracking tools that exist.

Mixing services, chain hopping and splitting large sums of crypto into smaller sums in different wallets would not help an oligarch hide their activities, Levin said.

"I'm actually surprised by your answers since you charge a lot of money to untangle and track assets through the system and the system keeps developing more ways to obscure that money," Warren responded.

UPDATE (March 17, 2022, 16:10 UTC): Updated with additional context.