U.S. Treasury Department: Russia Evading Sanctions Using USDT, Urges Congress to Expand Regulatory Authority

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USDT: A Tool for Evading Sanctions in Russia

Deputy Secretary of the Treasury Wally Adeyemo expressed concerns about the use of cryptocurrencies to finance terrorist organizations in a statement to the Senate.

He provided several examples:

• Five years ago, ISIS used social media platforms to conduct Bitcoin laundering, raise cryptocurrency donations, and purchase weapons.

• Over the past year, the Iranian Islamic Revolutionary Guard Corps transferred funds to the Palestinian Islamic Jihad (PIJ) using cryptocurrencies.

• Hamas also raised small donations through cryptocurrencies.

He stated:

The fact is that individuals associated with terrorist organizations, in response to government sanctions, are constantly seeking new ways to conceal identities and transfer cryptocurrencies. This includes not only terrorist organizations but also countries like North Korea and Russia.

Wally Adeyemo pointed out that North Korea uses various sophisticated cyberattacks, relies on mixing services and other anonymous technologies to conceal the source of funds, and uses over-the-counter trading to acquire fiat currencies. The U.S. has also observed an increasing use of stablecoins and other payment mechanisms by Russia to evade U.S. sanctions and continue funding its wars.

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Treasury Department Advocates Three Reforms

Wally Adeyemo advocated three reforms that he proposed to the committee in November last year:

1. Establish a New Regulatory Body under the Bank Secrecy Act for Sanction Tools

Wally Adeyemo believes that a new category of financial institutions should be established under the Bank Secrecy Act (BSA) to regulate exchanges, VASPs, cryptocurrency wallet service providers, node validators, and DeFi platforms to comply with anti-money laundering requirements.

Legislation should clearly authorize the Office of Foreign Assets Control (OFAC) to have extraterritorial jurisdiction over transactions involving U.S. dollar stablecoins.

3. Collaborate with Regulatory Bodies of Various Countries

The purpose of the third reform, as he pointed out, is to address the jurisdictional risks of offshore cryptocurrency platforms, which is a key challenge.

Wally Adeyemo's appeal is to further enhance the authority of relevant regulatory bodies and sanction tools to further mitigate the risks of cryptocurrency financing, especially as the cryptocurrency ecosystem is rapidly evolving.

He concluded:

If Congress does not take action and provide necessary sanction tools, the adoption of virtual assets by these bad actors will only increase.