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  • Russia Reportedly Drafting Crypto Regulations After International Restrictions
  • Treasury Identified Over 20 Russian Entities Trying To Evade Sanctions Using Crypto

Imposing sanctions on cryptocurrency mixers would help strengthen the US government’s response by preventing entities from evading sanctions, according to a Treasury official.

Elizabeth Rosenberg, assistant secretary for terrorist financing and financial crimes, said during a Tuesday hearing on Russia that adding crypto mixers like Tornado Cash to its list of specially designated nationals would effectively bolster current sanctions.

“When [sanctions] can serve as a deterrent to any criminal seeking to use a blender to launder their funds – the funds from the proceeds of corruption or other criminal activity – it is an effective way we can use to signal that we are not we cannot tolerate money laundering. So whether it’s a Russian criminal actor, an Iranian, a North Korean or wherever he comes from,” she said.

Russia is would have consider establishing rules for cross-border stablecoin payments by the end of this year. Prime Minister Mikhail Mishustin believes the financial system needs readjustment in the face of sanctions and restrictions.

When Senator Elizabeth Warren asked if it was possible for Russia to evade sanctions by using cryptocurrencies, Rosenberg said yes. Anonymity-boosting mixers, which obscure the trail of funds to disguise their origin, are another area of ​​concern for lawmakers.

The effectiveness of privacy techniques, including blending services, for money laundering has been challenged by co-founder of analytics firm Chainalysis, Jonathan Levin, during testimony in the Senate in March.

“We have done extensive work tracking large sums of money through mixers that have led to people being arrested and their businesses being disrupted,” Levin told Sen. Warren, noting that global liquidity through mixers was too weak to allow the penalties fraudsters to effectively conceal the funds.

“It is possible to trace the source of the money and where it flows,” Rosenberg said Tuesday, but added, “the detractor of that would be anonymity-enhancing technologies.”

Last month, the US Treasury added crypto mixing service Tornado Cash and 45 Ethereum addresses linked to its blocked list. This meant that individuals in the United States had no right to deal with them.

However, the move has drawn criticism from several crypto commentators, with some saying it is a bad idea for authorities to step in and try to criminalize a smart contract, thereby harming law-abiding US citizens who seek to protect their privacy in the process.

The Senate committee meeting was called to discuss “Tightening the Screws on Russia” in the wake of the aggression in Ukraine and the agency’s next steps in enforcing economic sanctions.

The Treasury has already identified Russian entities who attempted to circumvent sanctions using cryptography. Earlier this month he appointed 22 individuals and two entities for encouraging Russia’s continued invasion of Ukraine.

In April, the Foreign Assets Control Office designated a virtual currency mining company for the first time, along with commercial bank Transkapitalbank and a 40-member network led by oligarch Konstantin Malofeyev.

On-chain analysis revealed in July that around 10% of all funds sent from illicit addresses were received by mixers in 2022.

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    Shalini is a crypto journalist from Bangalore, India who covers market developments, regulation, market structure, and advice from institutional experts. Prior to Blockworks, she worked as a markets reporter at Insider and a correspondent at Reuters News. She holds bitcoin and ether. Join her at [email protected]

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