The White House is seeking to nullify Russia’s use of cryptocurrency to sidestep from economic sanctions over its invasion of Ukraine two weeks ago.

President Joe Biden is to sign an executive order on cryptocurrency this week that will seek, among other things, to nullify the use of cryptocurrency to counter the crippling effects that sanctions are having on Russia. The move comes as US officials have raised concerns in recent weeks about Russia’s use of cryptocurrency to evade the impact of crushing sanctions in response to its invasion of Ukraine.

The sanctions have sent the rouble to historic lows and have closed the Russian stock market. Crypto is one of several spaces that the Biden Administration is looking to shore up as it tries to make certain that sanctions on Russia have maximum impact.

It has been reported that Russian companies have many cryptocurrency tools at their disposal to evade American sanctions, including a so-called digital ruble and ransomware. In addition, Russian entities are preparing to suppress some of the worst effects by making deals with anyone around the world willing to work with them using digital currencies to bypass the control points that governments rely on mainly transfers of money by banks to block deal execution.

White House downplaying Russia’s ability to evade sanctions

While US officials have played down the significance of cryptocurrency to Russia’s ability to evade sanctions, it remains a concern.

US Treasury Secretary, Janet Yellen reported last week that the administration, “Will continue to look at how the sanctions work and evaluate whether or not there are liquid leakages and we have the possibility to address them. I often hear cryptocurrency mentioned and that is a channel to be watched.”

In the meantime, Biden’s national security team has already been on the lookout for the use and creation of front companies and alternative financial institutions that Moscow might try to employ to get around sanctions.

Additional export controls and new sanction targets are also expected to be unveiled in the days and weeks ahead to counter Russian sanction evasion efforts.

Yesterday, Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an alert advising financial institutions to be “vigilant” against any efforts to evade sanctions in connection with Russia’s war in Ukraine.

“Although we have not seen widespread evasion of our sanctions using methods such as cryptocurrency, prompt reporting of suspicious activity contributes to our national security and our efforts to support Ukraine and its people,” acting director Him Das said in a statement.

Developing regulations on digital currencies

The executive order is expected to describe what government agencies, including the Treasury Department need to do to develop policies and regulations on digital currencies. It is expected to include a request for the State Department to ensure that American cryptocurrency laws are aligned with those of US allies.

The Treasury Department is expected to ask the Financial Stability Oversight Council, which monitors the stability of the US financial system to study illicit finance concerns. Additionally, the order will explore the possibility of a new central bank digital currency. 

The Federal Reserve issued a paper on the topic in January that explores the risks and benefits of US-backed digital currency. Implicit in the order will be that cryptocurrency will remain a part of the US economy for years to come.