- The EU recently expanded its sanctions against Russia to include cryptos as the U.S cranks up similar measures – but should privacy coins be the next biggest concern?
- A top U.S think tank believes Russia could turn to these “anonymous” coins, as well as decentralized exchanges as they have very little KYC or oversight.
Regulators have continued to turn their attention to the use of cryptocurrencies as possible means to circumvent the crippling sanctions imposed on Russia. Initially, most governments dismissed the use of crypto by Russia, but in recent times, they have become more concerned. According to one top U.S think tank, the focus must go beyond Bitcoin and look at privacy coins like Monero and Zcash which offer near-anonymity to users. Decentralized exchanges (DEXes) are also an avenue that could be exploited, it says.
As CNF reported, the EU was the latest to focus on crypto use by Russia and its ally Belarus. In a statement this week, the EU included crypto in its sanctions against the two countries, declaring that “that crypto-assets fall under the scope of transferable securities.” It also claimed that “loans and credit can be provided by any means, including crypto assets.”
There have been calls to block Russians from exchanges – a call which the biggest exchanges have brushed off. Coinbase CEO believes that Russians have way too much money to launder it through BTC, and that even if they did, they’d be caught as the BTC ledger is public and transparent.
Read More: Coinbase, Kraken, and Binance refuse to freeze Russian crypto accounts
But what if they used privacy coins like Monero, Dash and Zcash?
In a recent statement, Brookings, one of the largest think tanks in the world, pointed to the possible use of privacy coins, calling on regulators to watch out for this trend.
Describing them as ” threatening to decouple the link between crypto wallets and traders’ identities,” it added:
For example, the coin Monero utilizes a number of privacy-enhancing technologies, like obscuring IP addresses, to obfuscate the identities of those involved in trades and to improve the fungibility of tokens. Monero therefore increases the likelihood that criminals can evade law enforcement and anonymously convert coins to cash.
Yet another trend that Russia could turn to is the use of decentralized exchanges. Unlike their centralized counterparts, DEXes rely on peer-to-peer systems and conduct little know your customer (KYC) checks, if any, “which means that it can be cumbersome for government officials to identify the parties involved in cryptocurrency transactions.”
Because these exchanges are not run by a single entity, they can be exceedingly difficult to police and lack the sanctions-enforcement mechanism of more centralized exchanges.
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“Rather than focusing on blockchains whose transactions are public and traceable, regulators should focus their attention where it’s more needed instead, such as privacy-enhancing coins and decentralized exchanges,” the think tank concluded.
Brookings is massively influential, with The Economist describing it as “perhaps America’s most prestigious think-tank.”
