The US Government Accountability Office (GAO) recently released a report on the risks of digital assets for evading US sanctions. However, the report has been criticized by Coinbase’s chief legal officer, Paul Grewal, who accused the GAO of doing no analysis and unfairly targeting the crypto industry.
The GAO report, followed by a federal response on Jan. 17, 2024, stated that some foreign actors facing US sanctions have used cryptocurrencies like Bitcoin to circumvent the restrictions. The report cited the example of a Chinese national who allegedly used Bitcoin to purchase software from a US company in violation of US export controls.
The report also claimed that digital assets pose challenges for implementing and enforcing US sanctions due to their ability to facilitate cross-border transfers of value. However, the report acknowledged that some factors partially mitigate these risks, such as the decentralized nature and public ledger of cryptocurrencies, which could be used to trace transactions and potentially identify illicit actors.
Coinbase Exec Defends Crypto Industry
In response to the GAO report, Coinbase’s chief legal officer, Paul Grewal, posted a scathing critique on Jan. 22, 2024. Grewal said that the GAO did zero comparative analysis and only harangued an industry that spends millions and millions to follow the law. He pointed out that the report itself admitted that digital assets are a relatively poor way to circumvent sanctions and that the use of digital assets as a means of payment is limited.
Grewal also criticized Senator Elizabeth Warren, who used the report to push for more crypto industry regulation. Warren, known for her anti-crypto stance, is sponsoring a bill requiring crypto companies to comply with the same anti-money laundering (AML) regulations as other financial institutions. Grewal argued that the crypto industry already follows AML rules and cooperates with law enforcement agencies.
The GAO report and the Warren bill are the latest examples of the regulatory uncertainty the crypto industry faces in the US. While some policymakers have called for clear and consistent rules for digital currencies, others have expressed concerns about the potential risks of digital assets for national security, consumer protection, and financial stability.
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