Amid Ukraine crisis, US Democrats introduce bill to restrict Russian crypto usage

Democratic U.S. senators introduced a bill on Thursday that would enable the president to sanction foreign cryptocurrency firms doing business with sanctioned Russian entities and prevent them from transacting with U.S. customers.

The Digital Asset Sanctions Compliance Act is led by Senator Elizabeth Warren and co-sponsored by 10 other Democrats, including Senators Mark Warner and Jon Tester. 

While the bill is unlikely to become law anytime soon, it could ramp up pressure on cryptocurrency exchanges, which have been on the defensive amid concerns from some lawmakers like Warren that digital assets are being used to circumvent a slew of Western sanctions imposed on Russia following its invasion of Ukraine.

Russian President Vladimir Putin "and his cronies can move, store and hide their wealth using cryptocurrencies, potentially allowing them to evade the historic economic sanctions the U.S. and its partners across the world have levied in response to Russia's war against Ukraine," Warren said in a statement.

Biden administration officials have said they do not believe Russia could use cryptocurrencies to completely evade sanctions, citing the lack of liquidity in crypto markets to facilitate high-volume transactions. Nevertheless, the Treasury Department has emphasized that digital asset firms are required to comply with the sanctions. 

Warren's bill would also allow the Treasury secretary to block digital asset platforms operating in the United States from transacting with any Russian crypto users, a step that major crypto exchanges like Coinbase (COIN.O) and Kraken have said they would not take without a legal requirement.

The bill would also require the Treasury to publicly identify foreign crypto trading platforms deemed to be at high risk for sanctions evasion and money laundering, and would require U.S. taxpayers to report any offshore crypto transactions exceeding $10,000.