Treasury warns digital currencies could weaken US sanctions

WASHINGTON – The Biden administration on Monday warned that digital currencies pose a threat to the US sanctions program and said in a n...

WASHINGTON – The Biden administration on Monday warned that digital currencies pose a threat to the US sanctions program and said in a new report that the US needs to modernize the way sanctions are deployed so that they remain a tool effective national security.

The warning was included in a six-month Treasury Department review of the country’s sanctions program, which has been used more aggressively in recent years as leverage for international diplomacy. The focus on digital currencies coincides with a government-wide effort to figure out how to regulate new financial technologies without stifling innovation.

“Technological innovations such as digital currencies, alternative payment platforms, and new ways to hide cross-border transactions all potentially reduce the effectiveness of US sanctions,” the Treasury report said. “These technologies provide opportunities for malicious actors to hold and transfer funds outside of the traditional dollar-based financial system.”

The Treasury Department also expressed concern that US adversaries had taken steps to reduce their reliance on the US dollar and said new digital payment systems could exacerbate this trend and erode the power of US sanctions.

The United States has implemented more than 9,000 sanctions, largely to punish countries like North Korea, Iran, and Venezuela for facilitating terrorism, violating human rights, or committing crimes. other illegal behavior. The strength of the US dollar and its role as the world’s reserve currency means that the United States can, at its discretion, cut off countries, groups, or individuals from much of the global financial system. This has intensified efforts to find new ways to escape US sanctions, including using digital currencies that do not pass through the traditional banking system.

The use of sanctions has reached record levels under the Trump administration, averaging more than 1,000 new appointments per year, according to law firm Gibson, Dunn & Crutcher. This year, the Biden administration is set to impose 900 sanctions, which would be the third highest total on record.

The seven-page report offered few details on how the Treasury plans to adapt to the new digital financial architecture that is spreading around the world. The recommendations included investing in new technologies and hiring staff specializing in digital assets.

A senior Treasury official told reporters on Monday that an important measure to prevent the escape of sanctions was greater coordination with other countries to make it more difficult to convert cryptocurrencies into government-issued money.

Last month, the Biden administration cracked down on the growing problem of ransomware attacks, extend its use of sanctions cut off the digital payment systems that have allowed such criminal activity to flourish and threaten national security.

The President’s Financial Markets Task Force is expected to issue a separate report this year with the recommendations for stable coins, which are asset-backed digital currencies that are growing in popularity.

The sanctions review was led by Wally Adeyemo, the Assistant Secretary of the Treasury. The report avoided making assessments of specific sanctions on countries or individuals. Instead, he offered general guidelines for improving the program, which the Treasury operates in coordination with the State Department and the National Security Council.

Other recommendations included creating a more systematic approach to sanction designations that could potentially remove some. The Treasury Department also said sanctions should be more targeted so that “the potential negative impact on others is minimized.”

The Treasury Department has assessed the sanctions it has imposed on the Taliban since the group toppled the government of Afghanistan this summer and work to ensure that humanitarian aid can still enter the country.

The agency currently has a leadership vacuum, as Senate Republicans have blocked confirmations from two of President Biden’s candidates – Brian E. Nelson and Elizabeth Rosenberg – to be its main sanctions officials. The Treasury Department has not had an Under Secretary for Terrorism and Financial Intelligence since Sigal Mandelker resigned his post in late 2019.

A senior Treasury official said on Monday that the department needed Mr Biden’s candidates to be confirmed so that the department could properly carry out its job of protecting national security.

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Newsrust - US Top News: Treasury warns digital currencies could weaken US sanctions
Treasury warns digital currencies could weaken US sanctions
Newsrust - US Top News
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