Coinbase General Counsel Paul Grewal has sharply criticized the US Government Accountability Office over its recent report on the use of cryptocurrency to evade sanctions.
In X's Jan. 22 post, Grewal said the U.S. GAO conducted a zero benchmark analysis only to “rebuke an industry that spends millions and millions to comply with the law.” He noted that even the report itself, buried deep in the links behind the clickbait, contains “an admission that digital assets are a relatively bad way to get around sanctions.”
And yet even in this missive, buried deep in the links behind the clickbait, there are admissions that digital assets are a rather poor way to circumvent sanctions. pic.twitter.com/8FJj3bVzBW
— paulgrewal.eth (@iampaulgrewal) January 22, 2024
The US GAO report in question was published on December 13 last year, and on January 16, GAO published the federal government's response to the matter. The GAO report states that there have been several cases in which foreign countries facing US sanctions have used cryptocurrencies such as Bitcoin (BTC) to circumvent the sanctions imposed on them.
An excerpt from the report read:
“Digital assets such as Bitcoin and other virtual currencies pose risks to the implementation and enforcement of US sanctions, but several factors partially mitigate these risks (see table). A key feature of digital assets is the ability for users to quickly transfer value across national borders.”
However, in the same report, the GAO acknowledged that cryptocurrencies' decentralized nature and public ledger could allow “U.S. agencies and analytics firms to monitor transactions and potentially identify rogue participants.”
Additionally, the report acknowledges that the use of digital assets as a means of payment is limited. The report also notes that implementing global standards can improve anti-money laundering compliance.
Despite these facts, the report was used by anti-cryptocurrency Senator Elizabeth Warren to stoke fear against the nascent industry and claimed that she had legislation that would ensure that cryptocurrency companies follow the same AML rules as other financial institutions.
A new @USGAO report confirms that rogue nations are using cryptocurrency to dodge sanctions and undermine our national security.
It's time for cryptocurrency to follow the same anti-money laundering rules as everyone else. I've got a bill to make it happen. https://t.co/TUX2sJ8HR0
— Elizabeth Warren (@SenWarren) January 21, 2024
However, people were quick to point out to her that the very article Warren is using to make crypto look bad is just one example of cryptocurrencies being used to avoid sanctions, and the party involved was the Chinese side.
The article you cite actually contains just ONE instance of digital assets being used to avoid sanctions.
From April 2023.
And they were Chinese. pic.twitter.com/V1IaMIcyGu
— Jeremy Hogan (@attorneyjeremy1) January 22, 2024
Key government regulators and policymakers are either already in place or have already put in place key mechanisms aimed at implementing anti-money laundering guidelines. Europe has already overtaken the Market for Cryptocurrency Assets (MiCA), while Asian countries such as Hong Kong, Japan and Singapore have also introduced strict regulations for cryptocurrency service providers.
Related: CoinEx Hack: Compromised Private Keys Lead to $70 Million Theft
Another important factor that most of these reports miss is the fact that the percentage of cryptocurrency used for illegal activities is less than 1% of the total circulating supply, which is significantly lower compared to cash. There have been several cases where attackers have taken years to move stolen or hacked cryptocurrency funds due to the public ledger system, and even in these cases they have been identified and often blocked by cryptocurrency exchanges.
On the other hand, the US is yet to finalize and unify cryptocurrency regulations for the country despite several politicians demanding it for quite some time. There are still certain regulatory rules governing the operation of cryptocurrency service providers.