A bureau of the Treasury Department, FinCEN, which is the United States Financial Crimes Enforcement Network, has issued a warning to financial institutions. It said that they there was a possibility that Russia could use crypto as a means of evading sanctions that have been imposed because of the military operation that it has launched in Ukraine. FinCEN issued an alert of Monday and warned all financial institutions based in the US that have convertible virtual currency (CVC), or visibility in crypto, to report any activity, which could be regarded as a way of Russia potentially evading the sanctions imposed against it by the US and its allies.

According to the US watchdog, it was not necessarily practical for Russia to evade large scale sanctions via CVCs. However, it said that it was the obligation of financial authorities to report any such activities from Belarusian or Russian individuals named in actions that are considered ‘economic warfare’. The acting director of FinCEN, Him Das, who has held the position since August 2021, said that financial institutions had to be vigilant about the possibility of Russia evading sanctions. He said that Russia was facing increasing economic pressure, which made it essential for US-based financial institutions to monitor both Russian oligarchs and state actors.

He stated that even though methods like crypto had not been used for evading the sanctions, but prompt reporting of any suspicious activity could be in favor of national security and would also be a way to support Ukraine and its citizens. A number of agencies and lawmakers have discussed the possibility of Russian banks and individuals trying to use crypto for evading the sanctions that had been announced on February 24^th by US President Joe Biden. The Office of Foreign Assets Control of the Treasury Department had also issued a warning on February 28^th to US residents about not using digital currencies to benefit Russia’s central bank, or government.

OFAC is the agency with the responsibility of enforcing and administering US sanctions. Its guidelines stated that crypto transactions were structured or deceptive dealings or transactions. EU and US lawmakers have also called attention to the potential of Russia to use crypto because its options are dwindling. The country has been cut off from the SWIFT payments network and a number of its major banks have ended up on the sanctions list. Ukraine’s minister of digital transformation, MykhailoFedorovhad also used social media to directly appeal to crypto exchanges, asking them to block Russian addresses.

However, a number of prominent crypto exchanges like Binance, Kraken and Coinbase have stated that they will not block all Russian users from accessing their crypto, with the exception of those that are on the sanctions list. US President Joe Biden has also signed an executive order for creative a comprehensive crypto regulatory framework, which is aimed at ensuring that Russia does not get to use digital currencies for evading sanctions. This comes in response to the country’s continued attack on Ukraine.