Yellen: No Evidence Russia is Bypassing Sanctions with Crypto

U.S. Treasury Secretary Janet Yellen said Wednesday there is no evidence that Russian government officials or oligarchs are using digital assets to skirt sanctions imposed by Washington in response to the invasion of Ukraine.

Yellen’s testimony before the U.S. House Committee on Financial Services comes roughly six weeks after the U.S. and its allies froze Russia’s $400B in foreign reserves and barred its banking system from using the Swift cross- border payments messaging system. The severe actions are meant to pressure Russian President Vladimir Putin to end his unprovoked war on Ukraine.

Speculation has been rife that Russian officials and oligarchs may tap blockchain-based assets to get around the sanctions.

Non-custodial Wallets

“We are aware of the possibility clearly that crypto could be used as a tool to evade sanctions and we are carefully monitoring to make sure that doesn’t occur,” Yellen told the committee. “Large-scale transactions would become apparent… we would see that there were large transactions taking place.”

The former chair of the Federal Reserve added that digital asset exchanges are subject to anti-money laundering and terrorism finance rules.

Rep. Warren Davidson (R-Ohio) expressed concerns that sanctioned individuals could use non-custodial wallets to evade the financial embargo. He said they enable “self-custody of private property without an intermediary.” Senate Democrats have also expressed concerns that digital assets may be used by Russia to evade the sanctions since early March. But Yellen and industry experts have been skeptical of claims that crypto would be effective in bypassing sanctions.

Yellen’s testimony occurred one day after the U.S. Office of Foreign Assets Control (OFAC) sanctioned the world’s largest darknet market, Hydra, and Russian crypto exchange, Garantex.

The action “reinforces OFAC’s recent public guidance to further cut off avenues for potential sanctions evasion by Russia,” the office said in a statement. OFAC noted that Garantex operates from Moscow’s Federation Building. The recently sanctioned exchanges Suex and Chatex are also headquartered in the Federation Building.

German Federal Criminal Police also shut down Hydra servers based in Germany and confiscated $25M in Bitcoin on the same day.