US House of Representatives Passes Bill to Prevent Sanctions Evasion via Cryptocurrency

On September 22, 2022, the US House of Representatives passed a bill aimed at preventing the evasion of sanctions through the use of cryptocurrencies. The bill, numbered HR-7338 and titled the “Russia Cryptocurrency Transparency Act,” was introduced by Representatives Gregory Meeks and Michael McCaul, both members of the House Foreign Affairs Committee.

In a joint statement, Meeks and McCaul emphasized the urgent need to cut off Vladimir Putin’s access to resources for Russia’s illegal “special operation” in Ukraine. They highlighted the potential role cryptocurrencies can play in money laundering and sanctions evasion, stating:

“While there are legitimate and valuable uses for cryptocurrency, some digital assets can be used to mask the origin of financial transactions and facilitate sanctions evasion. We are proud that the House has passed the Russia Cryptocurrency Transparency Act, which will provide necessary transparency and information about these practices, including the use of cryptocurrencies as rewards in [special] State Department programs. We hope to see this critical legislation pass the Senate and be signed into law by the White House, ensuring access to information that can impact US foreign policy as it adapts to the ever-changing landscape of financial technology.”

Key Provisions of the Bill

The Russia Cryptocurrency Transparency Act is designed to prevent Russia from using digital assets to bypass sanctions imposed by the United States and other countries. The bill addresses the growing risks associated with the use of cryptocurrencies to evade restrictions placed on Russia and Belarus.

According to Forklog, the bill requires the US Department of the Treasury and the State Department to report to Congress on:

• Any attempts by Russia or sanctioned individuals to use digital assets to circumvent restrictions related to Russia’s full-scale invasion of Ukraine;
• Efforts by sanctioned individuals to use DeFi services, exchanges, swap services, or wallets to conduct transactions;
• An assessment of the effectiveness of using digital currencies to enforce sanctions and the potential impact of the spread of such assets on “US national security interests”;
• Measures taken by the US government to counter sanctions evasion.

The bill also calls for US authorities to explore ways to support economic development and provide humanitarian aid to Ukraine, including through the use of blockchain technology and cryptocurrencies. It proposes appointing a specialist to address digital currency issues in the context of sanctions.

Additionally, the State Department must report to Congress on any rewards paid out in cryptocurrencies. The next step for the bill is consideration by the Senate.

Background and Related Developments

The bill to establish oversight of cryptocurrency use was first introduced by US lawmakers in late March of this year. In July, American diplomats urged Japan to increase pressure on the country’s cryptocurrency exchanges and miners to sever ties with Russia.