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Biden signs EO on responsible digital assets development amid Russia-Ukraine crisis

Updated: Mar 13

US, EU say Russia won’t evade sanctions via crypto. Global digital market now exceeds $3 trillion, up from $14 billion 5 years ago



Aftermath of Russian army bombardment on a children hospital in Mariupol, Ukraine, March 9th 2022. Photo by EYEPRESS MEDIA LIMITED via REUTERS
Aftermath of Russian army bombardment on a children hospital in Mariupol, Ukraine, March 9th 2022. Photo by EYEPRESS MEDIA LIMITED via REUTERS

US President Joe Biden signed yesterday (Wednesday) an Executive Order (EO) on Ensuring Responsible Development of Digital Assets, to address the risks and benefits of these assets and their underlying technology and establish the first-ever comprehensive federal digital assets strategy for the nation.


And while the text of the Executive Order made no mentioning of Russia – it is clearly on everyone’s mind, with practically any executive decision taken anywhere in the world viewed through this prism.


“The administration will continue to aggressively combat the misuse of cryptocurrency, including the use of it to evade US sanctions,” said a senior US administration official at the background briefing prior to the signing of the Order. “And that stance equally applies to the Russia-Ukraine crises, as it does to any other nation or regime or non-state actor that seeks to undermine US national security.”


As sanctions keep piling on Russia, there has also been a growing fear that it could find a way to shake them off (at least partially), using cryptocurrency. Earlier this week, Coinbase announced it is committed to complying with the sanctions, blocking some 25,000 digital wallets related to Russian entities or individuals.


The US official added that the current crisis “is a good opportunity for us to double down on that international work and help our partners build capacity to actually implement that anti-money laundering or cryptocurrency rules that we very much want to have in place.”


They mentioned that without proper oversight, this could provide “opportunities for criminals and other malicious actors to leverage cryptocurrencies to launder the proceeds of their crimes or circumvent justly-applied sanctions.”


US wants to asssume global digital assets leadership


Digital assets, including cryptocurrencies, have been enjoying tremendous growth over the past few years. In November 2021, this market surpassed $3 trillion – up from $14 billion a mere five years earlier. According to a White House fact sheet that accompanied the EO, some 40 million US adults have used or invested in cryptocurrencies, and more than 100 countries are exploring a digital form of their sovereign currency.


And while the US is looking forward to taking the reins, it is also concerned that if not properly managed, “the explosive growth in cryptocurrency use would pose risks to Americans and to the stability of businesses, the American financial system, and the nation’s national security,” according to the administration official who spoke with reporters.


The Order lays out a national policy for digital assets across several key priorities:

1. Protect US consumers, investors and businesses.

2. Protect US and global financial stability and mitigate systemic risk.

3. Mitigate illicit finance and national security risks posed by illicit use of digital assets.

4. Promote US leadership in technology and economic competitiveness to reinforce US

leadership in the global financial system.

5. Promoting equitable access to safe and affordable financial services.

6. Support technological advances and ensure responsible development and use of digital

assets.

7. Explore option of UC Central Bank Digital Currency (CBDC).



“Fundamentally, an American approach to digital assets is one that encourages innovation but mitigates the risks to consumers, investors, and businesses, broader financial stability, and the environment,” said National Economic Council (NEC) Direttor Brian Deese and National Security Advisor Jake Sullivan in a joint statement.


The two added that this Order “marks an intensification of our efforts to promote responsible innovation in the digital assets space” and that they are “clear-eyed that ‘financial innovatio’ of the past has too often not benefited working families, while exacerbating inequality and increasing systemic financial risk.”


EU: crypto assets fall under sanctions scope


In related news, the European Union clarified yesterday that “crypto assets fall under the scope of ‘transferable securities’ and further expand the existing financial restrictions,” and are therefore included in the sanctions imposed on Russia as well as on Belarus for its involvement.

On the Ukrainian side, Coindesk reported that Ukraine has received almost $100 million in crypto donations so far. Ukrainian Ministry of Digital Transformation, Alex Bornyakov, said in a briefing that more than $60 million was received in the main fund run by Ukrainian crypto exchange Kuna. On Saturday, Time reported that Ukraine had already spent $15 million of crypto donations on military supplies.

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