The Russia Cryptocurrency Transparency Act passed by the House of Representatives would require the State Department to report directly to Congress on payments regarding cryptocurrency.
According to the bill, the legislation would introduce cryptocurrency use regulations for the State Department. It was spurred due to concerns about using cryptocurrency to work around sanctions, according to a Sept. 21 news release from Reps. Gregory W. Meeks and Michael McCaul. The risks posed by the misuse of cryptocurrency would be mitigated by the bill and reduce national security liabilities and systemic financial risks posed by their misuse.
“The imperative of starving Vladimir Putin of funds for Russia’s illegal war in Ukraine has brought renewed focus on the role cryptocurrencies can potentially have in money laundering and sanctions evasion,” Meeks and McCaul said in the release. "Though there are legitimate and valuable use cases for cryptocurrencies, some digital asset products can be used to mask the origins of transactions and facilitate sanctions evasion."
They noted the proposed bill is expected to provide transparency about these practices, including the use of cryptocurrencies in the State Department rewards program, according to the news release.
"We hope to see this critical legislation pass through the Senate and signed into law by the White House to ensure access to information that can steer U.S. foreign policy as it adapts to a changing financial technology landscape," Meek and McCaul added, according to the release.
The act passed the House of Representatives and has been referred to the Senate Committee on Foreign Relations, according to the Congressional bill tracker. In addition to Congressional notification, the State Department would be required to appoint a director of digital security who would be responsible for issues related to digital currencies and U.S. sanctions and rewards programs that utilize cryptocurrency.
Congress finds “there are increasing concerns that these digital assets may be used to circumvent the sanctions now imposed on Russia and Belarus by the United States and other foreign countries," according to the bill.
To address the concerns countries such as Russia and Belarus use digital assets to avoid sanctions, the State Department would have to report to Congress before any cryptocurrency payment was made. This would include payments made to Ukraine for humanitarian needs, according to Section 4 of the bill.
The State Department would list each cryptocurrency payment it has made and explain why it decided to pay rewards in cryptocurrency. The act requires the State and Treasury Departments to submit a report to congressional committees assessing how digital currencies affect the effectiveness of sanctions against the Russian Federation. It must include recommendations for new measures to strengthen U.S. sanctions, according to the bill’s text.
