US GAO conducts ‘0 analysis’ for crypto report on sanctions evasion: Coinbase CLO
Coinbase's chief legal officer, Paul Grewal, came down heavily on the US Government Accountability Office's recent report on the use of crypto to evade sanctions.
In a Jan. 22 X post, the U.S. GAO said it had conducted a zero-sum analysis “to coordinate an industry that spends millions and millions of dollars to comply with the law.” Even in the report, he notes, buried in the links behind clickbait is “an acknowledgment that digital assets are a relatively weak means of evading sanctions.”
And yet in this missive, buried in the links behind Clickbait, is their admission that digital assets are the weakest way to avoid sanctions. pic.twitter.com/8FJj3bVzBW
— paulgrewal.eth (@iampaulgrewal) January 22, 2024
The US GAO report in question was published on December 13 last year, and on January 16, the GAO published the federal response to this issue. The GAO report said that there have been many instances of foreign countries facing US sanctions using cryptocurrencies such as Bitcoin (BTC) to circumvent the sanctions imposed on them.
Excerpt from the report:
“Digital assets such as Bitcoin and other virtual currencies pose risks to the implementation and enforcement of US sanctions, but a number of factors partially mitigate these risks (see table). A key feature of digital assets is that they allow users to quickly transfer value across national borders.”
However, in the same report, the GAO acknowledged that the decentralized nature of cryptocurrencies and public ledgers “allow U.S. agencies and analytical firms to track transactions and identify illegal actors.”
Apart from this, the report acknowledges that the use of digital assets as a means of payment is limited. The report also suggested that implementing international standards could increase compliance with anti-money laundering requirements.
Despite these facts, the report was used by anti-crypto Senator Elizabeth Warren to raise fears about the startup industry and said she has a bill in the works to ensure crypto companies follow the same AML rules as other financial institutions.
A new @USGAO report confirms that rogue governments are using crypto to evade sanctions and undermine our national security.
It's time for crypto to follow the same anti-money laundering laws as everyone else. I have a bill to make it happen. https://t.co/TUX2sJ8HR0
— Elizabeth Warren (@SenWarren) January 21, 2024
However, people were quick to point out that the article Warren is using to smear crypto provides only one example of using cryptocurrency to avoid sanctions, and that the party involved was China.
The article you cite contains only one example of digital assets being used to evade sanctions.
one.
From April 2023.
And they were Chinese. pic.twitter.com/V1IaMIcyGu
— Jeremy Hogan (@attorneyjeremy1) January 22, 2024
Major government regulatory bodies and policy makers are already working on or have already implemented key frameworks focused on implementing anti-money laundering guidelines. Europe has already overtaken the market in crypto assets (MiCA), while Asian countries such as Hong Kong, Japan and Singapore have implemented strict regulations for crypto service providers.
Related: CoinEx hack: Hacked private keys lead to $70M theft
Another major factor that most of these reports miss is that the percentage of crypto used for illegal activities is less than 1% of the total circulating supply, which is very low compared to cash. There have been many cases where stolen or hacked crypto funds have taken years for criminals to move due to public ledger systems, and in those cases they are identified and often blocked by crypto exchanges.
On the other hand, the US has yet to finalize crypto regulations for the country, despite several policymakers asking for some time. There are still some regulatory policies to govern crypto service providers.
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