At Hearing, Warren Calls Out Risks Of Crypto Mixers as a Tool for Russian Oligarchs and Illicit Actors to Evade Sanctions
“One thing I've learned over the past couple of years is where the crypto boosters cry the loudest, you're probably onto something. If crypto has nothing to hide on money laundering for oligarchs or drug lords or tax evaders, then they shouldn't mind a little transparency.”
Washington, D.C. – At a hearing of the Senate Banking, Housing, and Urban Affairs Committee, U.S. Senator Elizabeth Warren (D-Mass.) called out crypto mixers as a tool for Russian oligarchs and other illicit actors to evade sanctions and applauded the Department of Treasury (Treasury) for sanctioning crypto mixing services that facilitate illicit finance. Crypto mixers pool funds with the explicit purpose of hiding the origins of the funds – and one report estimates that nearly a quarter of all funds sent to mixers this year came from illicit actors.
Senator Warren applauded Treasury for sanctioning crypto mixers like Tornado Cash, which has been used to launder over $7 billion, with nearly 30% of its business tied to illicit actors, and Blender, which laundered funds for Russian and North Korean groups.
In response to questions from Senator Warren, Elizabeth Rosenberg, the Assistant Secretary for Terrorist Financing and Financial Crimes at Treasury, confirmed that crypto mixers and other technology used to hide crypto transactions make it harder for Treasury officials to enforce sanctions and that Treasury’s sanctions against crypto mixers help strengthen the U.S. sanctions regime against Russia and other illicit actors.
Senator Warren highlighted her Digital Asset Sanctions Compliance Enhancement Act, legislation she introduced in March that would ensure that Vladimir Putin and Russian oligarchs don't use digital assets to undermine the international community’s economic sanctions against Russia following its invasion of Ukraine
Transcript: Tightening the Screws on Russia: Smart
Sanctions, Economic Statecraft and Next Steps
U.S. Senate Committee on Banking, Housing, and Urban Affairs
Tuesday, September 20, 2022
Senator Warren: Thank you Mr. Chairman. Ever since President Biden announced sanctions against Russia for the invasion of Ukraine in February, I've had serious concerns about Russian elites potentially using cryptocurrency to evade sanctions.
Back then, we already knew that countries like North Korea had used crypto to skirt sanctions and launder at least hundreds of millions of dollars. And Russia could easily be part of that. So that’s why I introduced The Digital Asset Sanctions Compliance Enhancement Act, with many of my colleagues, actually on this Committee, to strengthen our sanctions regime.
Since my bill's introduction in March, Treasury has identified numerous cases of Russian entities attempting to evade sanctions with crypto. In April, Treasury sanctioned multiple Russian crypto mining companies. Just last week, Treasury sanctioned five crypto addresses tied to a Russian neo-Nazi paramilitary group. And on top of that, Russia's Deputy Finance Minister announced earlier this month that Russia is looking into using stablecoins as a way around Western sanctions.
Assistant Secretary Rosenberg, could digital assets be used right now, by Russian oligarchs to evade sanctions on Russia?
Elizabeth Rosenberg, Assistant Secretary for Terrorist Financing and Financial Crimes, U.S. Department of the Treasury: Yes senator, that’s possible.
Senator Warren: Alright, I appreciate your candid answer here. Many crypto boosters continue to claim that crypto could never be used, as a way to evade sanctions. Despite the evidence to the contrary, they say because blockchain is transparent, anybody could see where the tokens are moving, so, no problem here. Now obviously, we know, there are problems. A whole industry has popped up to create tools for illicit actors to tangle or hide the trail of crypto transactions.
One of these tools is called a mixture, which polls funds with the explicit purpose of hiding the origins of the funds. In fact, one report estimates that so far this year, nearly a quarter of all funds sent to mixers came from illicit actors.
Assistant Secretary Rosenberg, let's start with the basics. Do mixers, and other technology used to hide crypto transactions, make it harder for Treasury officials to do their job of enforcing sanctions?
Assistant Secretary Rosenberg: Anonymity-enhancing technologies, such as mixers, such as you mentioned, are indeed a concern for understanding the flow of illicit finance, and getting after it. It is true, that what you note, that on a public blockchain, it is possible to trace the source of money, and where it’s flowing. The detractor from that would be anonymity-enhancing technologies.
Senator Warren: That's right, like these mixers. So, that’s why I was glad to see last month, that Treasury sanctioned Tornado Cash, a mixer used by a North Korea-linked hacking group, to launder nearly half a billion dollars. Earlier this year, the mixing service, Blender, was sanctioned for laundering funds for Russian and North Korean groups.
Now, some in the crypto industry are furious over these sanctions. And they are fighting to have the chance to keep right on laundering money. Some downplay, some even lie, about the risks associated with their products.
One of the industry witnesses who testified before this Committee, earlier this year, claimed that mixers don't make it easier for illicit actors to hide their transactions. Well, that was clearly wrong. Tornado Cash alone has been used to launder over seven billion dollars, with nearly 30% of its current business tied to illicit actors.
Even so, Coinbase, the largest U.S.-based crypto exchange, is now bankrolling a lawsuit against Treasury, for its work to sanction these mixers. So, Assistant Secretary Rosenberg, will sanctions against mixers, like Tornado Cash, help strengthen our sanctions regime against Russia and other illicit actors?
Assistant Secretary Rosenberg: Thank you, senator. Sanctions, such as the one that you have noted, when they can serve as a deterrent to any criminal that would seek to use a mixer, in order to launder their funds, the proceeds of corruption, or other criminal activity. That’s an effective avenue we can use, in order to signal that we cannot tolerate money laundering. Whether that's for a Russian criminal actor, an Iranian, a North Korean, or wherever they may come from.
Senator Warren: Well I appreciate that. One thing I've learned over the past couple of years is where the crypto boosters cry the loudest, you're probably onto something. If crypto has nothing to hide on money laundering for oligarchs or drug lords or tax evaders, then they shouldn't mind a little transparency.
Thanks very much. Thank you Mr. Chairman.
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