Ukrainian authorities have imposed sanctions against 60 crypto companies so far. They have indicted 73 for allegedly facilitating Russia’s relocation of assets. Vladimir Zelenskyy signed the decree that enacted these measures that will work to disrupt the Russian crypto ecosystem. Initial sanctions were limited to asset freezes and prohibition on specified forms of economic activity within Ukraine. Specifically, they respond directly to the increased use of cryptocurrency in support of unlawful financial actions.
The targeted network represents a vast range of individuals and businesses, with 55 of the firms based in Russia. Sanctioned are 19 large-scale crypto mining companies and five crypto exchange operators, all based in Russia. At the same time, these actions signal Ukraine’s ongoing dedication to stemming the abuse of the crypto space for nefarious ends.
According to the Center for a New American Security, cryptocurrency has become a preferred mechanism for those wanting to more easily, quickly and secretly transfer assets across borders. Its speed, pseudo-anonymity, and borderless nature make it appealing for this type of financial crime. Ukraine is becoming more savvy at utilizing intelligence and blockchain forensics. This helps them to ensnare and prosecute bad actors who abuse cryptocurrency.
What Ukraine gets right with its efforts now can serve as a guide to other countries that find themselves in similar straits. If Ukraine continues to take bold, decisive steps forward, those actions should galvanize international support of all kinds. Together, they can ensure use of crypto for illicit finance is effectively combatted. This has the potential to encourage more co-operation between like-minded countries in sharing intel and co-ordinating sanctions.
The sanctions that Ukraine has imposed are more than just disrupting important – even if not entirely illegal – flows of illicit cash. They seek to establish a foundation of trust and accountability for the greater cryptocurrency ecosystem. Illegal use of cryptocurrency is something Ukraine is addressing. This bipartisan effort will create a much safer and transparent marketplace for all legitimate crypto activities to flourish. This will be key to the long term growth and adoption of cryptocurrency.
The first-of-its-kind move points to a growing nexus between national security and crypto regulatory compliance. With all of this in mind, governments around the world are finally waking up to the dangers of cryptocurrency. That’s why they’re undoubtedly going to increase their oversight of the industry. This will require crypto firms to strengthen their compliance programs and work more closely with regulators to prevent illicit activities.
Ukraine’s steps mark a break from how many governments have typically taken on the regulation of cryptocurrency. Other countries are taking a different tack with crypto. Rather than ban or limit it, they now want to find and focus on users who use it to facilitate illegal activity. Future governments will be less likely to adopt such an approach. They don’t seem to be against cryptocurrency, but rather want to support innovation while protecting national security.
Ukraine has attempted to send a message to the broader crypto industry with its sanctions. They should unequivocally communicate that illegal behavior is unacceptable. The industry movement is a challenging, but exciting boom and bust cycle of creation and iteration. First, it needs to actively deter the use of crypto as a laundering channel. This will take a serious, good faith effort by governments, regulators and the crypto sector itself.
