Coinbase’s Chief Legal Officer, Paul Grewal, has criticized the United States Government Accountability Office (GAO) for its recent report on cryptocurrency use in evading sanctions.
In a post on X (formerly Twitter) on January 22, Grewal expressed his disapproval, accusing the GAO of failing to conduct a meaningful comparative analysis and instead targeting an industry that invests heavily in complying with the law.
He pointed out that buried within the report were admissions that digital assets are not an effective way to circumvent sanctions.
The GAO report in question was released on December 13, 2023, and the federal response was published on January 16.
The report claimed that some foreign states facing U.S. sanctions had utilized cryptocurrencies like Bitcoin to evade these sanctions.
However, it also acknowledged that digital assets have inherent limitations, such as their decentralized nature and public ledger, which can be used by U.S. agencies and analytics firms to trace transactions and identify illicit actors.
Furthermore, the report conceded that the use of digital assets for payments is limited, and implementing global standards could enhance compliance with Anti-Money Laundering (AML) regulations.
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Despite these findings, Senator Elizabeth Warren seized upon the report to voice concerns about the crypto industry and push for stricter AML regulations.
Critics were quick to point out that the report only cited one instance of cryptocurrency use to evade sanctions, involving a Chinese party.
Moreover, major regulatory bodies and policymakers worldwide have been implementing frameworks to align cryptocurrency with AML guidelines, including the Markets in Crypto-Assets Regulation in Europe and similar regulations in Asian countries like Hong Kong, Japan, and Singapore.
A crucial point often overlooked is that the proportion of cryptocurrency used for illicit activities is less than 1% of the total circulating supply, significantly lower than that of fiat currencies like the U.S. dollar.
Instances of stolen or hacked crypto funds taking years to move due to the public ledger system are rare, and crypto exchanges often identify and block them.
In contrast, the United States has yet to finalize its crypto regulations, despite persistent calls from policymakers.
Nevertheless, specific regulatory policies are already in place to govern crypto service providers, helping to maintain compliance and prevent illicit activities within the industry.
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