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A coalition of US lawmakers wrote a letter to senior government officials on April 28 expressing urgent concern over the use of digital currencies like Tether (USDT) by countries like Russia, Iran and North Korea to circumvent international sanctions.
The letter, signed by Senators Elizabeth Warren (D-Mass.) and Roger Marshall (R-Kan.), was addressed to Secretary of Defense Lloyd Austin, Secretary of the Treasury Janet Yellen, the Under Secretary for Terrorism and Financial Intelligence Brian Nelson, Director of the Financial Crimes Enforcement Network Andrea Gacki and National Security Advisor Jake Sullivan.
Lawmakers pointed to recent reports, including a detailed Wall Street Journal article claiming that the stablecoin Tether has become crucial to Russian military operations, facilitating transactions despite global sanctions and financial restrictions.
The urgency expressed in the letter reflects a growing consensus among U.S. leaders that the regulatory framework surrounding cryptocurrencies must be strengthened to deal with the sophisticated methods employed by rogue countries to evade sanctions.
Evasion of sanctions
Lawmakers cited numerous instances where Russia used Tether to acquire dual-use technology, which helped support its military actions in Ukraine.
Despite Treasury sanctions against “Russia’s favorite exchange, Garantex,” the platform reportedly continues to process significant amounts of crypto transactions.
The ongoing problem has prompted U.S. officials to examine more than $20 billion in crypto transactions potentially linked to Russian exchanges after the sanctions. The letter also highlights concerns about the digital ruble and ransomware attacks as alternative methods for Russia to circumvent sanctions.
The senators also linked crypto to Russia's arms purchases from China, saying Russian arms dealers are using crypto to “circumvent” U.S. sanctions.
Additionally, the letter reveals the broader implications of digital assets in global conflicts, including North Korea's theft of billions in crypto assets to finance its nuclear ambitions and Iran's use of digital currencies to finance groups designated as terrorist organizations by the United States.
In response to these concerns, lawmakers are requesting a detailed briefing on steps taken and potential strategies to mitigate the risks associated with using crypto to evade sanctions. They emphasize the need for additional legislative and regulatory tools to effectively combat these challenges and preserve national security.
Previous developments
The November Treasury letter made two broad requests for new authorities: the creation of a secondary sanctions tool aimed at regulating crypto exchanges and financial technology services used in terrorism and the closing of loopholes that address the use of cryptography in illicit activities.
The letter also sought to confirm that The Office of Foreign Assets Control (OFAC) should have authority over stable dollar transactions that do not have points of contact in the United States.
Warren previously highlighted Treasury's request for additional authority over crypto in an April 17 letter, writing that any new legislation should include the entire previous request and that other regulatory frameworks would allow stablecoins to penetrate further in the banking system.
Warren is known for her numerous attempts to regulate crypto, primarily through her proposal Anti-Money Laundering Law on Digital Assets.
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