US seeks way to regulate cryptocurrencies

President Joe Biden will this week sign what will be the first US move toward cryptocurrency regulation.

The move comes as authorities fear Russia is trying to use cryptocurrencies to evade sanctions that the international community has imposed on it over its invasion of Ukraine. The sanctions have caused the ruble to collapse and have led to the closure of the Russian stock market.

Two sources familiar with the process, who asked not to be identified, said the executive order will be signed this week and was in the works well before the war.

The order is expected to stipulate what US government agencies, including the Treasury Department, have to do to develop rules and policies on the use of virtual currencies.

It is expected to include mechanisms for the State Department to verify that US policies in that sector are in line with those of other countries, and for the Financial Stability Oversight Board—which monitors the stability of the US financial system—to assess risks of illicit activities.

Apart from that, the order will explore the possibility of having a digital currency that is backed by the central bank. The Federal Reserve (Fed) published a monograph on the subject in January, exploring the risks and benefits of having a bank-backed digital currency.

The order contains the implicit acknowledgment that cryptocurrencies will be part of the US economy in the future. Bloomberg News was the first to report on plans to issue the executive order.

While US officials have downplayed the possibility of Russia using cryptocurrency to evade sanctions, some concern remains.

“We will continue to evaluate the effects of the sanctions and we will evaluate whether or not there is evasion, and if we have the possibility of dealing with it. I often hear about cryptocurrencies and that is a channel to watch,” Treasury Secretary Janet Yellen said last week.

An administration official who asked not to be identified said the United States is already monitoring the possible creation of shell companies or other alternatives that Moscow might try to use to evade sanctions.

The cryptocurrency sector is one of many that the Biden administration is keeping an eye on to ensure that the sanctions have the greatest possible effect.

The official said the United States has learned from its experiences with sanctions imposed on Iran and Venezuela. He added that more sanctions and export controls will be announced in the coming days, in order to prevent Moscow from evading the sanctions.