U.S. Treasury Secretary Janet Yellen testified before the House Financial Services Committee on Wednesday
Following sweeping sanctions on Russia after its invasion of Ukraine and a depletion of foreign-exchange reserves, some observers have speculated that the country might turn to cryptocurrencies to try to evade sanctions.
Leading exchanges, including Coinbase and Kraken, have previously said it is unlikely that Russia would use that route.
While U.S. authorities have warned exchanges about “assisting” Russia by facilitating suspicious transactions, the consensus among experts is that crypto is an unlikely means of sanctions evasion.
No “material” crypto channel for sanctions evasion
Treasury Secretary Janet Yellen echoed that view during her appearance before the House Financial Services Committee on Wednesday.
“We are clearly aware of the possibility that crypto could be used as a tool to evade sanctions, and we are watching carefully to make sure that does not happen,” Yellen said.
She told lawmakers that U.S. authorities can detect whether large transactions involve Russia and indicated that officials are tracking the situation closely. Her remarks suggested there is no “material” evidence that Russia is using crypto to meaningfully evade sanctions.
“So far, we have not seen significant evasion through crypto, but we will monitor closely and use our agencies to ensure this does not become a primary channel for evasion,” the former Federal Reserve chair said in testimony to the House committee.
In early March, Yellen acknowledged some use of crypto to try to avoid sanctions. She stressed, however, that federal agencies are monitoring the sector, and that many of the exchanges likely to be used in such attempts operate under anti–money laundering (AML) frameworks.
Platforms are also required to comply with sanctions rules, and the sector is not one in which evasion can be “fully advanced,” she added.
Yellen’s comments align with conclusions drawn by blockchain analytics firm Chainalysis. In testimony before the Senate Banking Committee in March, the company noted it had not found significant blockchain evidence of large-scale evasion.
On Wednesday, U.S. lawmakers introduced legislation aimed at banning U.S.-based exchanges from serving users in Russia. The bill would also seek to give President Joe Biden authority to sanction foreign crypto exchanges deemed to be assisting Russia.