Highlighting the possibility in traditional financial structures to evade compliance with economic sanctions, popular crypto exchange Coinbase has proposed using cryptocurrencies to prevent money laundering and sanction evasion that becomes possible using fiat currency.
The Ukraine-Russia conflict has prompted global authorities to impose economic sanctions that also encircle cryptocurrency exchanges. While some platforms refused to comply with the sanctions and few used the middle way, Coinbase decided to fully support the government’s efforts to ensure national security. Coinabse Legal Director Paul Grewal points out in an official statement blog post that the use of digital currency will promote “national security and deter unlawful aggression”.
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Grewal inferred that governments have imposed sanctions for many years to prevent the laundering of fiat money. Yet traditional financial institutions remain the preferred option to evade sanctions, he added;
By transacting through shell companies, incorporating into known tax havens, and taking advantage of opaque ownership structures, malicious actors continue to use fiat currency to hide the movement of funds.
Additionally, the Coinbase representative identifies the benefits of using blockchain technology, which maintains inherently public, permanent, and always traceable records of transactions. Similarly, government authorities can combat sanctions evasion by leveraging technology.
Jake Chervisky, a prominent crypto layer, recently expressed his thoughts on how impossible it is to use cryptocurrencies to counter compliance evasion. Considering the same facts revealed by Jake, Coinbase’s exchange Grewal adds that anyone wishing to use technology to prevent sanctions evasion would need “virtually unobtainable amounts of digital assets”, and said;
Therefore, trying to conceal large transactions using open and transparent crypto technology would be much more difficult than other established methods (e.g. using fiat, art, gold or other assets) .
Proactive measures taken by Coinbase
To comply with the sanctions, the proactive measures taken by Coinbase include:
- Detection of escape attempts.
- Blocking reported entities during registration.
- Presentation of an analysis program used to anticipate threats.
On the other hand, some crypto companies have prepared measures to deter the use of virtual assets due to the sanctions applied by the US government in connection with the Ukraine-Russia conflict. One of its examples is Prague-based crypto wallet provider Satoshi Labs, which said it is stopping shipping its wallets to Russia.
Expressing the company’s decision, a company representative, Kristýna Mazánkov, revealed that although crypto is apolitical, the decision to restrict Russia was made because the company’s many “employees have connections with the conflict that make it personal”.
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Apart from paving the way for law enforcement to track suspicious activity on a transparent blockchain, cryptocurrency also plays a vital role in obfuscating the privacy of individuals in the traditional financial system. Grewal said;
We believe we can balance these interests by continuing to support law enforcement efforts while promoting policy frameworks that respect the privacy of individuals.
Featured image from Pixabay and chart from TradingView.com