Friday, March 4, 2022

NY Crypto Enforcement Tools To Prevent Russia From Evading Sanctions

New York is beefing up its Cryptocurrency Enforcement, to ensure Russia cannot use Digital Currencies, to get around Sanctions implemented in response to the Country’s Invasion of Ukraine.

Gov. Kathy Hochul (D) said Wednesday, that the State would expedite the purchase of Analytics Software, that she hopes will help the State monitor Cryptocurrency Transactions among the Companies it Licenses.

In the days following the Sanctions against Russia, several Major Cryptocurrency Exchanges have pledged to ensure their Enforcement. But New York's Top Banking and Insurance Regulator, the Department of Financial Services, wants New Tools to make sure they keep to that commitment.

"We know that bad actors will try to evade sanctions through the transmission of virtual currency, which is why it is imperative that we have the ability to monitor transactions and exposure in real time," said Adrienne Harris, Superintendent of Financial Services.

New York has, by most accounts, the Nation's Strictest Cryptocurrency Licensing Rules. Companies that facilitate Cryptocurrency Trading among New Yorkers, must have a State-administered BitLicense or a Limited purpose Trust Banking Charter. Both Licenses require Cryptocurrency Companies to prove they have Strong Anti-Money Laundering and Know-Your-Customer Compliance Policies, which should Block Transactions by Sanctioned Individuals.

The State had been seeking Stronger Enforcement Power before Russia's Invasion of Ukraine. Hochul said in her State of the State Address in January, that her Administration would Prioritize buying Blockchain-Analysis Software to "enhance the state’s ability to proactively and reactively monitor cryptocurrency exchanges."

Blockchain Analytics Software, such as the Products developed by New York-based Chainalysis or Competitor Elliptic, Analyze the Anonymized Ledger that Powers Cryptocurrency Transactions, assisting Regulators or Private Companies in investigating Fraud or other Criminal Activity.

Hochul's announcement responds to Concerns spanning well beyond Albany that Russia will use Virtual Currency to avoid Sanctions. Four leading Democrats on the U.S. Senate Banking Committee, including Elizabeth Warren (D-MA), wrote a Letter to the Treasury Department asking how it is ensuring that U.S. and Global Sanctions are upheld in Cryptocurrency Markets.

A Challenge for New York in enforcing the Order, is that many of the largest Cryptocurrency Exchanges are Not Licensed here. That includes the World's Largest Exchange by Trading volume, the Cayman Islands-based Binance. Binance Officials have said Publicly that the Company will Block Sanctioned Accounts. But the Company is Resisting calls, including from Ukraine’s Vice Prime Minister, to Block All Transactions from Russian Accounts. "We are not going to unilaterally freeze millions of innocent users' accounts," a Company Representative said. "Crypto was meant to provide greater financial freedom for people across the globe."

Coinbase, the Second-largest Global Cryptocurrency Exchange and a New York License Holder, has taken a similar stance. "Our mission is to increase economic freedom in the world," a Coinbase Representative said. "A unilateral and total ban would punish ordinary Russian citizens who are enduring historic currency destabilization as a result of their government’s aggression against a democratic neighbor."

Cryptocurrency Marketplace Gemini, which is Headquartered and Licensed in New York, is Not Operational in Russia or Ukraine, but is “conducting a robust review of customer accounts and activity to identify any exposure to sanctioned parties or regions and will take appropriate steps as necessary,” a Representative said.

Separate from Cryptocurrency, Hochul on Sunday, signed an Executive Order to Divest any State Resources from Russian Institutions.

NYC Wins When Everyone Can Vote! Michael H. Drucker

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