The U.S. Treasury Department is contending that cryptocurrencies stunt sanctions efforts and threaten national security, foreign policy, and economic interests.
The warning comes after a six-month Treasury Department review of the country’s sanctions program and policies.
The seven-page report details how international actors are already reducing their exposure to the US financial system.
“American adversaries – and some allies – are already reducing their use of the US dollar and their exposure to the US financial system more broadly in cross-border transactions.
We must be mindful of the risk that these trends could erode the effectiveness of our sanctions.”
The Treasury says that technological advancements like cryptocurrencies serve as a vehicle to undermine traditional financial services and could harm the effectiveness of US sanctions.
“Technological innovations such as digital currencies, alternative payment platforms, and new ways of hiding cross-border transactions all potentially reduce the efficacy of American sanctions.
We are mindful of the risk that, if left unchecked, these digital assets and payments systems could harm the efficacy of our sanctions.”
The report suggests that the Treasury should try to better understand and utilize digital assets to help support sanctions efforts without stifling financial innovation.
“In particular, [the] Treasury should invest in deepening its institutional knowledge and capabilities in the evolving digital assets and services space to support the full sanctions lifecycle of activities.”
The Treasury concludes by acknowledging that financial innovation and macroeconomic shifts will require the US to adapt its sanctions policy to address rising threats.
“The United States faces a changing world where financial innovation, shifts in global economic activity, and new geopolitical challenges are redefining how economic power can be used to support national security objectives.
To effectively confront these changes, Treasury must modernize and adapt its sanctions policy and operational framework.”
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