Biden Issues Executive Order on Cryptocurrency to Enhance the Impact of Sanctions on Russia
U.S. President Joe Biden finally ends all the speculation in
signing an executive order on March 9, in a first-of-its-kind executive order toward
regulating digital currencies. Federal agencies have been instructed to coordinate
their efforts in creating cryptocurrency rules. The move comes in the wake of administration
officials having raised concerns in recent weeks about the possibility of
Russia's use of cryptocurrencies to suppress the impact of stringent sanctions
in response to its invasion of Ukraine. The sanctions have sent the rubble
plummeting to historic lows and have closed the country's stock market.
The executive order, which is the first of its kind to focus solely on the rapidly rising digital asset sector, orders federal agencies to better communicate their work in the industry, although it does not specify how the administration wants agencies to act. The directive does not mention of any new rules for compliance by crypto companies.
The move comes as lawmakers and administration officials were
increasingly concerned that Russia was utilising cryptocurrencies to suppress
the impact of sanctions placed on its banks, oligarchs, and oil industry as a consequence
of the invasion of Ukraine.
People familiar with the process said the executive order on
cryptocurrency had been in the process long before the conflict. The finance
industry, crypto traders, speculators, and lawmakers, who have compared the cryptocurrency
market to the Wild West, were all looking forward to the executive order, which
was originally reported to be in the works since October 2021. Government
sources reveal that about 16% of adult Americans or 40 million people are
estimated to have invested in cryptocurrencies, close to 43% of men aged between
18 and 29 are said to have invested in the digital currency.
The focus of executive order was expected to describe the
role of government agencies, including the Treasury Department, to develop
policies and regulations on digital currencies. It was also expected to include
a request for the State Department to ensure that American cryptocurrency laws
are aligned with those of US allies and direct the Financial Stability
Oversight Council which monitors the stability of the US financial system to
study illicit finance issues, while exploring the possibility of a new central
bank digital currency.
The Federal Reserve issued a paper in this regard in January
that covers the risks and benefits of US-backed digital currency. The White
House's plans to move forward with the executive order were first reported by
Bloomberg News. ‘We will continue to look at how the sanctions work and
evaluate whether or not there are liquid leakages and we have the possibility
to address them. I often hear cryptocurrency mentioned and that is a channel to
be watched,’ Treasury Secretary, Janet Yellen had voiced her concern last week.
A senior administration official who spoke on condition of
anonymity said the president's national security team has already been on the
lookout for the use and creation of front companies and alternative financial
institutions that Moscow might try to employ to get around sanctions. Crypto is
one of the several avenues that the Biden administration is looking to plug up
as it tries to enhance the impact of sanctions on Russia with maximum impact.
The official also explained how their past experiences in
Iran and Venezuela regarding to evasion of sanctions are being reviewed and the
inputs being shared to plug all the possible leakages by the administration
team. He has also indicated additional export controls and a slew of new
sanctions in the coming days and weeks ahead to counter Russian sanction
evasion efforts. Treasury's Financial Crimes Enforcement Network has also been issued
an alert advising financial institutions to be on the lookout against any
efforts to evade sanctions in connection with Russia's war in Ukraine.
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