The news: Chainalysis, a blockchain fintech that offers investigatory and compliance solutions, is proposing steps that the US government can take to clamp down on sanctions evasion and other illicit activities using cryptos.
- Co-founder and Chief Strategy Officer Jonathan Levin shared the company’s proposals in testimony before the Senate Banking Committee.
The proposals: Sanctions the US levied after Russia invaded Ukraine provided context for Levin’s testimony as he shared three short-term steps designed to address sanctions compliance.
Add sanctions designations to entities that enable evasions, which could include crypto exchanges and mixers. Levin cited designations levied on two entities, Chatex and SUEX as precedents.
Add digital wallets to sanctions designations of individuals—including their wallet addresses, to help cut off funding to the wallets.
Boost information sharing to improve the government’s awareness of current threats.
Levin also proposed four long-term measures to better fight crypto-based illicit activities more broadly:
Congressional funding for blockchain intelligence, to support tools and personnel count. The funding would go to two Treasury Department entities: the Office of Terrorism and Financial Intelligence (TFI) and the Financial Crimes Enforcement Network (FinCEN).
Congressional funding for training and staffing agencies dedicated to probing illicit crypto activities.
Give clarity to existing market regulators, like the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), with respect to their jurisdictional authorities in the digital assets space.
Establish a Virtual Asset Coordination Center to enhance how federal agencies work together for the space.
The big takeaway: Chainalysis’ suggestions help advance the ongoing dialogue about regulating crypto. Oversight that ensures consumer safety will help the asset class shed its “Wild West” reputation and become more mainstream.
- Dedicated funding and resources for market regulators may assuage companies or individuals who are wary about participating in crypto.
Addressing sanctions in particular could help US authorities with a major enforcement gap: uncertainty over how much crypto exchanges are helping Russia dodge sanctions.
- In the same week, a group of Democratic senators proposed legislation to go after crypto companies that help with Russian sanctions evasion.