Cryptocurrency Indicated Is Still Used In Russia-Ukraine Conflict, Regulators Want To Tighten Rules

JAKARTA - Global financial regulators are closely scrutinizing the use of crypto assets during the war in Ukraine. This comes after concerns that cryptocurrency could be used to evade Western sanctions against Russia.

The $1.8 trillion crypto sector is on the defensive amid warnings from US and European lawmakers that digital asset companies are not meeting their obligations. Previously crypto companies had been asked to comply with Western financial sanctions imposed on Russia following the country's invasion of Ukraine.

Several cryptocurrency exchanges have rejected calls to cut all users off from Russia, raising concerns that cryptocurrency could be used as a way to circumvent the sanctions.

Ukraine has also raised more than $100 million in cryptocurrency after posting appeals for donations on social media for military and humanitarian needs in bitcoin and other digital tokens.

“We at FSB are monitoring the situation, and the conflict situation relative to cryptos,” said Patrick Armstrong, member of the Financial Stability Council (FSB) secretariat, at the City & Financial Conference in London.

According to Armstrong, the FSB, which groups financial regulators, central banks and finance ministry officials from the G20 Group of economies, shares the information it obtains among its members.

The European Union on March 9 issued guidance confirming that sanctions on loans and credits to Russia include crypto assets, in a bid to close a potential sanctions loophole.

John Glen, UK Minister for Financial Services, said at the same conference that the steps that the UK has taken to bring crypto assets under anti-money laundering and terrorist financing restrictions will support law enforcement in crypto assets.

"We think these steps will actively support the government's response to the Russian invasion of Ukraine," Glen said.

But David Raw, a policy officer at the UK's Financial Conduct Authority, said 90% of crypto companies seeking approval for anti-money laundering controls had either withdrawn their applications or were rejected because they could not meet the standards.

All companies conducting cryptocurrency-related activities in the UK face a late March deadline for approval. Raw tries to reassure those still stuck in the authorization queue.

"This wouldn't happen if you suddenly had to stop trading," Raw says.

The UK is also cracking down on crypto promotions and Glen said the UK government is still considering whether other rules are needed for blockchain, which underpins crypto assets.

“We are not done with crypto yet,” said Raw.