Regulators Monitor Crypto Over Russia Sanction Fears

Financial regulators have said they are monitoring the use of cryptocurrencies amidst the war in Ukraine and concerns that digital assets could be used to circumvent Western sanctions on Russia.

The Financial Stability Board (FSB), which includes financial regulators, central banks and finance ministry officials from the Group of 20 economies, is sharing information amongst its members on the issue, said FSB secretariat member Patrick Armstrong at a City & Financial conference.

“We at the FSB are monitoring the situation, the conflict situation relative to cryptos,” Armstrong told the conference, Reuters reported.

UK financial services minister John Glen told the conference that the government’s existing steps to regulate crypto-assets under anti-money laundering rules will support enforcement of the sanctions.

Evading sanctions

“We think that these steps will actively support the government’s response to Russia’s invasion of Ukraine,” Glen said.

But David Raw, a policy official at the Financial Conduct Authority, cast doubt on crypto firms’ ability to monitor illegal transactions.

He said 90 percent of the crypto firms seeking approval under anti-money laundering rules have either withdrawn their applications or been refused because they did not meet standards.

The European Union on 9 March issued guidance confirming that sanctions on loans and credits to Russia include cryptoassets, as it looks to close potential loopholes.

Legalisation in Russia

A Russian lawmaker last week told local media that cryptocurrencies could be used to connect Russia to the global financial system in spite of sanctions, and said Russia should work to set up its own domestic crypto exchange infrastructure.

Alexander Yakubovsky, a member of the State Duma, the lower house of the Russian parliament, told the Parlamentskaya Gazeta that the “competent development of digital financial assets will minimise the damage from sanctions against the country”.

The Russian central bank has advocated banning cryptocurrencies in the interests of financial stability, while the Ministry of Finance has worked toward regulating them.

Yakubovsky told the paper legalisation efforts were moving ahead.

Ukraine crypto

Ukraine has to date raised roughly $100 million (£76m) in crypto-assets after calling for donations via social media, with most of the contributions being in either Bitcoin or Ether.

The country last week enacted a law officially legalising cryptocurrencies in the country, after revising an earlier version of the law proposed last year.

The law paves the way for the establishment of a regulated cryptocurrency infrastructure in Ukraine, where the assets have been neither legal nor illegal up to now.

“The signing of this law by the president is another important step towards bringing the crypto sector out of the shadows and launching a legal market for virtual assets in Ukraine,” said the Ministry of Digital Transformation in a statement last week.

On 4 March Ukraine’s deputy minister of digital transformation Alex Bornyakov said $15m of the donations had been spent on non-lethal military equipment such as bulletproof vests.