Elizabeth Warren’s Crypto Bill Aims to Close Sanction Loopholes

As President Biden’s cryptocurrency executive order moves forward, the U.S. is poised to analyze the opportunities and risks in crypto and explore a digital version of the U.S. dollar. Meanwhile, U.S. Senator Elizabeth Warren (D-Mass.) is pushing her own crypto bill forward in hopes of closing loopholes that could help Russia evade sanctions.

Warren’s proposed bill hasn't been voted on, but she hopes it will go into law to “ensure crypto isn’t used by Putin and his cronies to undermine [U.S.] economic sanctions,” according to a tweet by the Senator.

The proposed bill would include cryptocurrency as a barred form of payment among U.S. sanctions against Russia, which would help close a potential loophole. Outside of capital gains taxation, governmental cryptocurrency regulation has yet to materialize to anything substantial, and Warren’s bill is a big step. However, the war in Ukraine marks special circumstances, meaning this could be an entryway for increased congressional crypto involvement.

In a letter to the U.S. Department of the Treasury last week, Warren and three of her colleagues — Senate Intelligence Committee Chairman Mark Warner (D-Va.), Senate Banking, Housing, and Urban Affairs Chairman Sherrod Brown (D-Ohio), and Senate Armed Services Committee Chairman Jack Reed (D-R.I.) — shed light on concerns that Russia could use crypto to evade economic sanctions placed by the U.S.

In the letter, the congresspeople wrote, “Given the need to ensure the efficacy and integrity of our sanctions program against Russia and other adversaries, we are seeking information on the steps Treasury is taking to enforce sanctions compliance by the cryptocurrency industry.”

The letter emphasizes dark web marketplaces powered by cryptocurrencies, crypto wallets, digital ruble tokens, and ransomware attacks as major concerns. The bill’s backers add, “There are growing concerns that Russia may use cryptocurrencies to circumvent the broad new sanctions it faces from the Biden administration and foreign governments in response to its invasion of Ukraine.”

Warren’s bill remains a draft proposal. While bills can often move slowly, there's urgency in the matter, suggesting bipartisan support for the bill.

Imposing crypto-specific sanctions doesn’t necessarily require a bill. The Biden administration could do so via an executive order, but the bill puts the issue in the limelight. This could potentially speed up the process if the Biden administration decides to proceed.

“As you sanction the [Russian] central bank, which is a good thing, I worry about how the cryptocurrency could be used by the Russians to stay afloat,” Sen. Lindsey Graham (R-S.C.) told reporters last week.

The Treasury hasn’t responded favorably to Warren’s push and remains confident in its existing methods of watching cryptocurrency transactions for potentially illicit sanction-evading activity. For Warren, that isn't enough, and she’s speaking up to make it known. Meanwhile, Ukraine continues to use cryptocurrency as a donation fundraising tool to help fund its domestic fight against Russia.