The conflict in Ukraine has caused several sanctions to be imposed on Russia. However, not all of it is effective. To counter this, Coinbase has suggested the use of crypto to make the sanctions more effective. It is hoped that the use of crypto will take it difficult for Russia to evade sanctions. When traditional currency and existing financial means are used, it is possible to evade sanctions.
Crypto for effective sanctions
This suggestion was made by Coinbase’s Paul Grewal who heads their legal affairs. The suggestion was made via a blog that he posted. In the blog, he justified the sanctions of individuals and nations. Grewal opined that such sanctions are a good means of deterring aggression by nations against other nations.
Grewal felt that the current method of imposing sanctions was quite porous. Nations through the use of shell companies and using tax havens are able to evade sanctions. By using opaque ownership and dubious players in the financial systems it was possible to disguise the flow of money.
On the contrary, all digital transactions are transparent and in the public domain. Transparency makes it difficult for evaders to disguise the flow of funds. It also makes it easy for sanctions to be enforced.
Grewal’s assertion was supported by other lawyers such as Jake Chervinsky. Chervinsky opined that it would be impossible for any nation to obtain the necessary amount of digital assets to evade sanctions.
Coinbase has already moved in this direction. It had already barred blocked players from accessing the exchange. It also uses analytics to detect attempts at evasion. Taking Coinbase’s lead, others crypto agencies have also initiated steps to ensure that nations do not use crypto to evade sanctions.
An additional advantage with crypto is that while enabling law enforcement, the privacy of individual could also be protected.
The DFS in the US plans to work with more players in the crypto space to enforce stricter compliance with sanctions by Russia.