Coinbase proposes crypto tech to promote global sanctions compliance

0
90

Coinbase, a US-based cryptocurrency exchange, has proposed using cryptocurrencies to impose financial penalties. This recommendation comes from highlighting how easy it is to launder and evade paper currency thanks to the traditional financial infrastructure.

A blog post by Coinbase General Counsel Paul Grewal talks about the increasing scope of global sanctions imposed in connection with the Russia-Ukraine conflict. Cryptocurrency exchanges supported the government’s decision to impose sanctions on individuals and territories, and emphasized their importance in “strengthening national security and deterring illegal aggression.”

Grewal points out that despite the sanctions imposed by governments over the years, mandatory money laundering through traditional financial institutions remains the most common way to avoid sanctions:

“Through trading through shell companies, registering in well-known tax havens and using opaque ownership structures, attackers continue to use fiat currencies to disguise the movement of funds.”
On the other hand, Grewal argued that transactions with digital assets are public in nature, traceable and permanent — an important function that public authorities can use to detect and prevent evasion.

In addition, well-known crypto lawyer Jake Cherwinsky highlighted why the authorities cannot use cryptocurrency to avoid penalties. While acknowledging this same order, Grewal stated that entities intending to oppose sanctions would require “virtually inaccessible volumes of digital assets,” adding:

“As a result, it will be more difficult to try to hide large transactions using open and transparent crypto technology than other established methods (such as using securities, art, gold or other assets).
Some of the proactive steps Coinbase has taken to implement the global sanctions program include blocking access to devices reported during the registration process, detecting evasion attempts and alerting threats using sophisticated blockchain analytics software.

In addition, other crypto companies have begun taking steps to limit the use of cryptocurrencies based on the sanctions recommended by the US government. For example, Prague-based crypto wallet provider Satoshi Labs has announced that it will stop providing Russia with crypto wallets. Satoshi Labs spokeswoman Kristina Mazankov said that while Bitcoin (BTC) is apolitical, the move to restrict sending crypto wallets to Russia took place because “corporate employees have links with a struggle that makes it personal.”

Cryptocurrencies not only help law enforcement to track suspicious activities through a transparent blockchain, but also play an important role in protecting people’s privacy, a principle found in the traditional financial system. Grewal concluded:

“We believe we can balance these interests by continuing to support law enforcement while promoting a policy framework that respects privacy.”
Related: New York State Steps Up Blockchain Surveillance to Enforce Sanctions

In the first week of March, the New York State Department of Financial Services (DFS) announced the introduction of blockchain-based technology to bolster existing global sanctions.

Source: CoinTelegraph

LEAVE A REPLY

Please enter your comment!
Please enter your name here