LONDON (Parliament Politics Magazine) – According to new regulations introduced in response to fears that bitcoin and other cryptoassets are being used to get over restrictions put in place in response to Russia’s invasion of Ukraine, cryptocurrency exchanges must notify suspected sanctions violations to UK authorities.
On August 30, official guidance was revised to specifically include “cryptoassets” among the things that must be blocked if sanctions are placed on a person or business. Cryptoassets could include non-fungible tokens in addition to digital currencies like bitcoin, ether, and tether as well as other notionally valuable digital assets.
The regulations established by the Treasury’s Office of Financial Sanctions Implementation, say the cryptocurrency exchanges will be breaking the law if they fail to report customers who are subject to sanctions. Under the regulations, cryptocurrency exchanges have the same obligations as professionals like estate agents, accountants, jewellers and lawyers to take appropriate action if they suspect one of their customers is subject to sanctions or if they suspect a breach of sanctions.
Sanctions have been aimed at oligarchs and family members with direct ties to cryptocurrency. Among them was Vladimir Potanin, the “nickel king” and once the second-richest person in Russia, who supported the Swiss blockchain company Atomyze. Son of oligarch Mikhail Gutseriev, Said Gutseriev held a stake in a cryptocurrency exchange in Belarus until August 2021 before being subjected to sanctions in June on the same day as Potanin. Oleg Deripaska, a tycoon in the metals industry, has already pleaded with Russia’s central bank to permit the use of bitcoin as a payment method. They have not been implicated in using cryptoassets to dodge sanctions.
Polina Kovaleva, foreign minister Sergei Lavrov’s stepdaughter and Elizaveta Peskova the daughter of Putin’s spokesman, Dmitry Peskov, along with other relatives of Russian politician’s accounts have been blocked claims Binance, the largest cryptocurrency exchange in the world by trading volume. The exchange has allayed concerns that cryptocurrency may be used to evade sanctions.
The UK already has regulations against using cryptocurrency to dodge sanctions and transfer money abroad. These laws cover all “economic resources.” The alteration highlights the authorities’ worry about the relatively new assets, which may be helpful for dodging sanctions because users do not rely on regulated firms to conduct transactions.
The UK’s action, said to Anna Bradshaw, a partner at the London law firm Peters & Peters, was in line with the broader general spread of financial services and anti-financial crime legislation to the crypto industry.
For the purposes of an asset freeze, crypto and virtual assets were viewed no differently from any other form of assets, she said. However, relying on cryptocurrencies or virtual currencies might make it harder to identify sanctioned parties, related transactions, or other sanctioned activity, at least in time for preventive measures to be taken.
Regulators have paid attention. The White House and the US Treasury asked cryptocurrency exchanges to cease operations in Russia in February. Cryptoassets are subject to sanctions regulations, said a joint statement from UK financial regulators released in March. The EU forbade significant crypto transactions with Russia in April.
A spokesperson for the Treasury stated it was critical to address the danger that cryptoassets would be used to violate or evade financial sanctions. The new rules would apply to businesses that either track their holdings of cryptoassets or facilitate their transfer, making them the most likely sources of relevant data.
