The UK government has recently taken steps to update its guidance on financial sanctions in order to address potential loopholes in the previous rules. This move specifically targets the use of cryptocurrencies as a means to evade sanctions, with a focus on exchanges that may be facilitating such activities.
Under the new regulations, cryptocurrency exchanges are now mandated to inform the Treasury if a client appears on the officially designated sanctions list. Failure to comply with this requirement will be considered a criminal offense, highlighting the government’s seriousness in tackling this issue.
There have been growing concerns that individuals and businesses associated with the Russian regime, including those linked to President Putin, may be using digital currencies such as Bitcoin, Ether, Tether, or NFTs to circumvent sanctions. The Treasury’s Office of Financial Sanctions Implementation has published guidelines outlining the legal obligations that exchanges must now adhere to, placing them on par with other regulated businesses like real estate firms, accounting practices, law firms, and jewelers.
A Treasury spokesperson emphasized the importance of addressing the risk of crypto-assets being used for illicit purposes, stating that the new requirements are aimed at firms that hold or facilitate the transfer of crypto-assets, as they are most likely to possess relevant information.
Despite initial claims by major crypto exchanges like Coinbase and Binance that the market is too small and traceable for oligarchs to effectively use for sanctions evasion, there have been reports of accounts linked to the relatives of Russian politicians being blocked. Binance, for example, took action in April to restrict accounts associated with individuals such as Olina Kovaleva and Elizaveta Peskova, who are relatives of high-ranking Russian officials.
Overall, the UK government’s updated sanctions regime signals a proactive approach to preventing the misuse of cryptocurrencies for illicit purposes, underscoring the importance of compliance and transparency in the digital asset industry.