Senator Elizabeth Warren used the U.S. Governmental Accountability Office report to show crypto in a negative light despite the report’s content offering a contrasting view.
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Coinbase chief legal officer Paul Grewal came down heavily on the United States Government Accountability Office (GAO) over its recent report on crypto use for evading sanctions.
In an X (formerly Twitter) post on Jan. 22, Grewal said that the U.S. GAO carried out zero comparative analysis only to “harangue an industry that spends millions and millions to follow the law.” He highlighted that even in the report itself, buried deep in the links, are “admissions that digital assets are a relatively poor way to circumvent sanctions.”
And yet even in this missive, buried deep in the links behind the clickbait, are admissions that digital assets are a rather poor way to circumvent sanctions. pic.twitter.com/8FJj3bVzBW
— paulgrewal.eth (@iampaulgrewal) January 22, 2024
The U.S. GAO report in question was published on Dec. 13, 2023, and on Jan. 16, the GAO published the federal response to the issue. The GAO report claimed that there have been several instances where foreign states facing U.S. sanctions used cryptocurrencies like Bitcoin (BTC) to bypass the sanctions imposed on them.
An excerpt from the report reads:
“Digital assets like Bitcoin and other virtual currencies pose risks to implementing and enforcing U.S. sanctions, but several factors partially mitigate these risks (see table). A key feature of digital assets is enabling users to rapidly transfer value across countries’ borders.”
However, in the same report, the GAO admits that cryptocurrencies decentralized nature and public ledger could enable “U.S. agencies and analytics firms to trace transactions and potentially identify illicit actors.”
Apart from that, the report admits that using digital assets as a means of payment is limited. The report also noted that implementing global standards may increase compliance with Anti-Money Laundering (AML) regulations.
Despite these facts, the anti-crypto Senator Elizabeth Warren used the report to fearmonger against the industry. Warren is currently pushing a bill to ensure crypto companies follow the same AML regulations as other financial institutions.
A new @USGAO report confirms that rogue nations are using crypto to dodge sanctions and undermine our national security.
It’s time for crypto to follow the same anti-money laundering rules as everyone else. I’ve got a bill to make it happen. https://t.co/TUX2sJ8HR0
— Elizabeth Warren (@SenWarren) January 21, 2024
However, people quickly told Warren that the report she cited mentioned just one instance of using cryptocurrencies to avoid sanctions, and the party involved was Chinese.
The article you cite actually contains just ONE instance of digital assets being used to avoid sanctions.
From April 2023.
And they were Chinese. pic.twitter.com/V1IaMIcyGu
— Jeremy Hogan (@attorneyjeremy1) January 22, 2024
Major government regulatory bodies and policymakers worldwide have implemented frameworks to align crypto with Anti-Money Laundering guidelines. Europe has already passed the Markets in Crypto-Assets Regulation, with Asian countries such as Hong Kong, Japan and Singapore also implementing strict regulations for crypto service providers.
Another major factor that most reports overlook or ignore is that the amount of crypto used for illicit activities is less than 1% of the total circulating supply — a significantly lower proportion compared to fiat currencies like the U.S. dollar. There have been several instances where stolen or hacked crypto funds have taken years for the perpetrators to move due to the public ledger system, and even in those cases, they are identified and often blocked by crypto exchanges.
On the other hand, U.S. has yet to finalize crypto regulations despite several policymakers demanding them for some time. However, there are specific regulatory policies in place to govern crypto service providers.