US Fears Cryptocurrencies Could Weak Sanctions, Dollar Dominance
WASHINGTON – Cryptocurrencies pose a threat to U.S. sanctions and the dollar’s dominant role in the global economy, the Treasury said this week, and the U.S. must adopt more safeguards to protect national security.
One of the biggest threats from new forms of electronic money, according to US officials, is that they could weaken sanctions against the countries, companies and individuals that the United States seeks to punish. The United States has implemented over 9,000 sanctions.
“The advent of cryptocurrencies makes it harder for sanctions to be effective,” US Deputy Treasury Secretary Wally Adeyemo told a Senate committee in a hearing this week. His testimony coincided with a Treasury report on how crypto could undermine sanctions.
Another concern: digital currencies such as Bitcoin BTCUSD,
enable individuals and groups to engage in cybercrime and bypass the traditional dollar-based financial system to cover their tracks.
Take the growing wave of so-called ransomware attacks. Cybercriminals hack large computer systems and demand ransoms from victims in cryptocurrencies that cannot be found.
Once again this week, the owner of the big television channel Sinclair Broadcast Group SBGI,
was hit by a major ransomware attack that temporarily disrupted some of its 185 stations. And over the summer, a devastating ransomware attack on Colonial Pipeline caused widespread gasoline shortages in the Southeast.
Ransomware groups have raised hundreds of millions of dollars through crypto payments, Adeyemo noted.
Digital currencies have seen their popularity increase in recent years. Americans and others around the world have rushed to get into crypto. Digital coins are unrelated to central banks, and users claim transactions are more secure.
A Senate cryptocurrency hearing on Tuesday was aimed at trying to find ways to modernize U.S. sanctions and ensure they remain effective. Biden’s White House and congressional lawmakers fear that digital currencies pose a great threat to national security if they don’t grow unchecked.
One option the Treasury is considering is sanctions against cryptocurrency companies that facilitate ransomware payments.
What’s even more critical, Adeyemo said, is strengthening alliances with other countries, as many cybercriminals live and operate outside of the United States.
It is hard enough for criminals to engage in transactions that avoid the use of the dollar, he said, but it is even more difficult if they cannot use “the euro, the pound or yen ”to cover up their behavior.
Imposing sanctions with allies “makes it easier for us to hold our adversaries to account,” Adeyemo said.
Some senators also expressed concern that the rise of alternative payment systems, such as the Chinese digital yuan, could threaten the dollar’s status as a global reserve currency. The reserve status of the dollar gives the United States a big economic advantage over other countries.
Yet Adeyemo asserted that the dollar will remain the world’s reserve currency because most countries and businesses “trust” the United States for the strength of their economy and the certainty of their laws.