In fact, some people may even consider trading out of digital assets into traditional fiat if they assess elevated cyber risks that could threaten their digital holdings.įurther, if you’re a G20 economy and you’re under Russia-like sanctions, it’s impossible to flip a switch and run on cryptocurrencies overnight. Importantly, digital assets do not necessarily have an advantage over cash – or dollars – in many crisis scenarios. I remain skeptical that digital assets will radically change the way the overall global financial system operates or transfers funds in a crisis, at least as they stand today. In general terms we should be realistic about how much digital assets can fundamentally change the nature of geopolitical or economic conflicts, or how useful they are in such contexts. Nonetheless, this is a real risk, and we must be vigilant anytime we see even the possibility for exploitation of digital assets by transnational criminal networks, terrorist financers, and rogue states. We take this reporting seriously, but with a grain of salt as we do not expect this will be a primary method of sanctions evasion for designated Russians. Immediately after the imposition of international sanctions against Russia, stories circulated about the potential for cryptocurrencies to enable sanctions evasion, allow the corrupt Kremlin-linked elite to hide their wealth, and further finance Russian aggression. This is, to my mind, at least a partial vindication of one of cryptocurrency’s longstanding promises.īut that, of course, is just one half of the story. Even more significant, this occurred with relative ease at a time of enormous uncertainty and disruption. While this represents a small part of the overall humanitarian assistance sent to the Ukraine, this accomplished a meaningful, laudable goal: supporting Ukraine through the rapid transfer of funds across international borders. More than $100 million worth of cryptocurrencies poured into the country within a few weeks of Russia’s brutal invasion, with Ukraine moving swiftly to put in place legislation to regulate the cryptocurrency sector. Digital assets have facilitated the flow of financial assistance to Ukraine. In certain ways, the intersection of these two trends has been a boon during this crisis. The user community is different as well-in some ways more inclusive, in others dependent on access to resources and technologies that advantage some over others. Simultaneously, in a second contemporary development, we are witnessing exponential growth in new assets, financial technologies, and forms of financial services and intermediation that do not necessarily rely on the traditional financial system and its well-established institutions. Russia is increasingly isolated in this extraordinary effort to deny Vladimir Putin, his cronies, and their key commercial institutions access to or use of funds to enable the ongoing aggression in Ukraine and to the inputs needed to power their war machine. Over 30 partner countries, including the United States, have imposed unprecedented sanctions and financial measures to cut Russia off from the international financial system. I’d like to begin by mentioning a key financial development associated with the Russia/Ukraine geopolitical crisis. Today I’d like to share with you how Treasury considers the nexus of these two - the use of digital assets, including cryptocurrencies, in times of geopolitical crisis. This discussion couldn’t come at a more apt moment-we’re living through a period of intense market and government interest in digital assets, as well as a major geopolitical crisis in Russia’s brutal and unprovoked invasion of Ukraine. Hello, everyone. Thank you to the Institute of International Finance for inviting me to speak with you all today.
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