The cryptocurrency industry is quietly lobbying U.S. lawmakers against legislation designed to prevent Russian oligarchs from using digital currencies to evade sanctions imposed on Russian President Vladimir Putin’s allies and their companies after Russia’s attack on Ukraine.
The Blockchain Association, a lobbying group representing more than 70 crypto platforms including Ripple, Crypto.com and Dragonfly Capital, is trying to convince Congress that cryptocurrencies are not used by wealthy Russians to avoid sanctions. He is working with lobbyist Forbes Tate Partners against legislation that imposes new sanctions on already punished Russians seeking to use the crypt as a way to avoid sanctions. The bill will also allow the finance minister to block US-based trading platforms from doing business with Russian ones.
Two bills have been introduced in the House of Representatives and the U.S. Senate that give the Biden administration the power to ban U.S. cryptocurrencies from processing payments from Russia. The bills will also allow U.S. authorities to impose sanctions on foreign exchanges that handle transactions by Russian citizens or companies subject to sanctions.
The legislation poses a serious threat to the industry, which critics say has become popular for clandestine deals because they cannot be traced. It will, in effect, be subject to digital currencies by some of the same rules that require federal insured banks to know their customers, fight money laundering and report suspicious transactions to regulators.
The group says it is helping Congress “separate facts from the fabrication of Russia’s inability to transfer large sums of money through crypto-transactions to avoid sanctions,” according to an email from Curtis Kincaid, the group’s spokesman. A spokesman for Forbes Tate Partners declined to comment, sending CNBC to the Blockchain Association for questions.
Jake Chervinsky, political leader of the Blockchain Association, later said the bills were not aimed at Russian oligarchs, but directly against American crypto companies.
“These bills are not aimed at Russian oligarchs who do not use (and cannot use) crypto to evade sanctions. They are aimed at good U.S. crypto companies for no apparent reason other than the @SenWarren crusade against technology it does not understand,” – said Charvinsky on Twitter after the publication of this story.
The crypto industry has stepped up its lobbying efforts as the Biden administration looks closely at whether and how to regulate digital assets. In March, President Joe Biden signed a decree urging regulators to study the risks and benefits of cryptocurrencies.
The Blockchain Association spent $ 460,000 on its own lobbyists during the first quarter, a record amount since its launch in 2018, according to records of lobbying disclosures. The crypto-lobbyist store said last year that it had received more than $ 4 million in donations from three crypto-giants: the Digital Currency Group, Kraken and the Filecoin Foundation.
According to her first-quarter report, the group is lobbying against Russia’s Digital Asset Sanctions Act. The House of Representatives bill will target Russians and their subsidiaries trying to use cryptocurrency to circumvent their own sanctions. Crypto industry leaders say digital currencies cannot be used to evade sanctions.
Some lawmakers, however, say digital currencies should be regulated in the same way as banks, as the industry exposes itself as an alternative banking system. The United States has imposed sanctions on many Russian financial institutions, including the country’s central bank. Recently, the Ministry of Finance aimed at mining bitcoins operating in Russia.
“The crypto industry presents itself as an alternative financial system, an alternative bank. Banks have been sanctioned on the left, right and center, and banks are leaving Russia, ”said Democratic MP John Garamendi of California, who is co-sponsoring the House bill, CNBC said in a recent interview. “So if they imagine a financial mechanism, then they are in the same league, in the same situation as Bank of America or a Russian bank.”
The group is also lobbying for an accompanying bill authored by Senator Elizabeth Warren, Massachusetts, in the Senate, according to a first-quarter lobbying report. This bill, called the 2022 Law on Tightening Sanctions on Digital Assets – an almost identical name introduced by Democrats in the House of Representatives – was also designed “to impose sanctions on the use of cryptocurrency to facilitate transactions by Russians subject to it.” under action ”. sanctions, ”the summary of the bill reads.
Warren, who is a member of the Senate’s powerful finance and banking committees, recently told National Public Radio that the bill should provide the Treasury with tools to tighten control over crypto-platforms.
“Russian oligarchs can continue to use the crypt to move their money. So we will just give the Ministry of Finance permission to handle these crypto platforms just like with banks. That is, you need to know your client and you can’t deal with people who violate sanctions, ”Warren said in an interview last month.
Warren accused the crypto industry of undermining U.S. national security and sanctions against Russia.
“Not surprisingly, the unregulated crypto industry has deep pockets and an army of lobbyists fighting against the basic rules to ensure consumer safety, but is shocked that they will also work to undermine US national security and our sanctions regime against Russia,” Warren said. said in an email.
The Mortgage Bankers Association, a mortgage finance advocacy group, is also included in the quarterly filing of the Klept Act, a bipartisan bill supported by Warren, along with Senator Sheldon Whitehouse, MD; Bill Cassidy, R-La .; and Roger Wicker, R-Miss., according to a group report for the first quarter. A spokesman for the Mortgage Bankers Association initially did not return a request for comment.
Bill Kilmer, chief lobbyist for the Mortgage Bankers Association, told CNBC in a statement days after the publication that it had not yet taken a position on the bill.
“As expected, the MBA monitors all legislation that may affect real estate financing, including S. 4075 KLEPTO Act. We have not taken an official position on the bill, ”Kilmer said in an e-mail on Monday.
The legislation is designed to expose the property of “oligarchs, kleptocrats and international criminals hiding in the United States, strengthen U.S. security measures against money laundering and equip law enforcement with information needed to track luxury assets of kleptocrats in the United States.” the US financial system, ”the press release reads.
