Yellen says crypto hasn't been used for significant Russian sanctions evasion so far

United States Treasury Secretary Janet Yellen told the House Financial Services Committee on Wednesday that her department is not seeing significant use of cryptocurrencies to evade sanctions placed on Russian oligarchs and government agencies. Yellen was asked repeatedly about digital asset security at the committee’s annual hearing on the state of the international financial system.

“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 said. “But, I would say that we have a good deal of authority in this area and are using it and will use it.”

It is hard to use crypto to evade sanctions, Yellen assured the committee, as blockchains are being “regularly examined,” and large transactions would be made note of. “[Crypto] exchanges are subject to AML/CFT [Anti-Money Laundering/Combatting the Financing of Terrorism] regulations, so they are part of the financial system,” she said. “We haven’t seen significant evasion through crypto so far.”

The Treasury’s Office of Foreign Assets Control announced Tuesday that it will impose sanctions on Moscow-based digital currency exchange Garantex for disregarding AML/CFT regulations, and on the Russian-language darknet marketplace Hydra for accommodating ransomware attacks. The Treasury was one of several U.S. agencies that worked to sanction those organizations.

Sanctions were not the only crypto-related issues on committee members’ minds. Representative Bill Foster asked about digital identity verification. Yellen said her department has “very wide-ranging equities in the digital identity space, in part because we administer public benefits [and] tax refunds,” and assured the congressman that “we are fleshing out actions that we can take to advance this agenda.”

Representative Warren Davidson of Ohio expressed his concern about preserving self-hosted digital wallets, which he characterized as “self-custody of private property without an intermediary.”

Yellen will speak about U.S. President Joe Biden’s executive order on digital assets and the Treasury’s approach to it at American University in Washington, D.C. on Thursday.