Coinbase, a cryptocurrency exchange based in the United States, has advocated using bitcoins to help assure compliance with economic sanctions. This proposal is based on the ease with which existing banking infrastructures enable the laundering and evasion of fiat money.
The article, written by Coinbase’s chief legal officer Paul Grewal, discusses the growing number of worldwide sanctions imposed in the midst of the Russia-Ukraine war. The cryptocurrency exchange backed the government’s decision to impose penalties on individuals and regions, emphasizing the necessity of such measures in enhancing national security and discouraging unlawful acts.
Grewal points out that, notwithstanding the sanctions imposed by governments throughout the years, the most sought-after method of sanction evasion remains the laundering of fiat currency through established financial institutions.
He claimed that bad actors continue to exploit fiat currency to conceal the movement of cash by trading through shell firms, incorporating in established tax havens, and leveraging opaque ownership structures.
Grewal, on the other hand, stated that digital asset transactions are inherently public, traceable, and permanent – a crucial quality that governing agencies may use to discover and deter evasion.
Furthermore, noted crypto lawyer Jake Chervinsky emphasized why governments cannot utilize cryptocurrencies to avoid penalties. Recognizing this, Grewal warned that actors seeking to circumvent sanctions would require practically unattainable amounts of digital assets.
Coinbase has taken preemptive measures to build a global punishment program, such as limiting access to flagged businesses during the signup process, detecting evasion attempts, and anticipating risks using a sophisticated blockchain analytics software.
Furthermore, other crypto firms have begun to take efforts to further discourage the usage of cryptocurrencies based on the sanctions advocated by the US government.
For example, Satoshi Labs, a Prague-based crypto wallet supplier, has announced that it will no longer send crypto wallets to Russia. Satoshi Labs spokesperson Kristna Mazánkov stated that while Bitcoin (BTC) is apolitical, the decision to prohibit the shipment of crypto wallets in Russia was made because firm employees had personal ties to the conflict.
In addition to assisting law enforcement in tracking suspicious activity on a transparent blockchain, cryptocurrencies serve an important role in protecting individuals’ privacy; a principle that exists in the traditional banking system.