Coinbase Criticizes US Authorities for Manipulating Cryptocurrency Facts

Coinbase’s Chief Legal Officer, Paul Grewal, expressed criticism towards the US Government Accountability Office (GAO) over a report concerning the use of cryptocurrencies to evade sanctions.

Zero comparative analysis performed. Heck, zero analysis whatsoever performed. Instead they harangue an industry that spends millions and millions to follow the law. Ask yourself— why? https://t.co/a7VKV0vKR4

— paulgrewal.eth (@iampaulgrewal) January 22, 2024

According to Grewal, the GAO conducted “zero comparative analysis to criticize an industry that spends millions to comply with the law.”

On January 16, the office released a report on the effectiveness of economic sanctions and the impact of digital assets on them. The document states that the US has already encountered several instances of sanctions evasion through cryptocurrencies. 

“Digital assets, such as bitcoin and other virtual currencies, pose risks to the implementation and enforcement of US sanctions, but several factors partially mitigate these risks. A key feature of digital assets is the ability for users to quickly transfer funds across country borders,” the study notes.

The GAO highlighted several key risk factors of cryptocurrencies: 

• Digital assets provide users with a degree of anonymity that can be used to conceal financial transactions;
• Participants in the crypto market can exploit differences between legal systems and financial reporting requirements in various jurisdictions to avoid consequences of illegal financial activities;
• Sanctioned entities may use cybercrime to generate income, such as by stealing digital assets.

However, as Grewal noted, the report itself acknowledges that digital assets are a relatively poor means of sanctions evasion. 

The document states that the decentralized nature of cryptocurrencies and the public ledger can allow “US agencies and analytical firms to track transactions and potentially identify wrongful participants.”

Additionally, the GAO acknowledges the limited use of such assets as a payment method. The report also notes that the implementation of global standards could enhance compliance with anti-money laundering (AML) rules.

Despite these facts, US Senator Elizabeth Warren used this report to disparage the industry. 

A new @USGAO report confirms that rogue nations are using crypto to dodge sanctions and undermine our national security.

It’s time for crypto to follow the same anti-money laundering rules as everyone else. I’ve got a bill to make it happen. https://t.co/TUX2sJ8HR0

— Elizabeth Warren (@SenWarren) January 21, 2024

“The GAO study confirms that rogue nations use cryptocurrency to evade sanctions and undermine our national security,” she wrote.

Users on X pointed out to Warren that the article cites only one example of financial restrictions being bypassed using digital assets from April 2023, allegedly by Chinese citizens. 

Previously, five senators supported Warren’s proposed bill, which suggests introducing KYC procedures for “wallets, miners, validators, and other network participants.” According to the document’s authors, it aims to prevent the illegal use of crypto assets for drug trafficking, sanctions evasion, and terrorism financing.

Back in December 2023, the issuer of the USDT stablecoin, Tether, blocked 161 addresses from the OFAC sanctions list. Of these, 150 were empty.