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At Elliptic, we believe that cryptoassets will form the foundation of a financial system that is fairer, freer and safer for all. Since 2013, we have dedicated ourselves to this vision by working on the fight against money laundering and evasion of sanctions in crypto-assets. In doing so, we helped build trust in cryptocurrencies and enabled the industry to grow.
The war in Ukraine has shown that powerful technologies such as cryptocurrency can be used in both positive and negative ways. A fundraising campaign the Ukrainian government has shown how cryptocurrencies can transcend borders. Indeed, at the time of writing, more than 120,000 people worldwide have donated $63.8 million in crypto assets. Growing trading volume indicate that ordinary Russians are bypassing oppressive capital controls and fleeing the devaluing ruble to the haven of crypto assets.
On the other hand, cryptocurrency fundraising has also been used in the past Russian-backed forces. There is also real risk Russia using cryptoassets to circumvent sanctions through state-sponsored cybercrime, wealth concealment and even cryptocurrency mining. Crypto is certainly not a silver bullet against sanctions, but Iran and North Korea have shown how it can be used to reduce their impact. When countries face serious sanctions, they will look for any and all means to raise funds and avoid restrictions.
In response, we have redoubled our efforts to strengthen the financial services industry to prevent Russian sanctions evasion. Through data collection, analysis and research:
- We have identified more than 400 Virtual Asset Service Providers (VASP) – mostly exchanges – where cryptoassets can be bought for rubles. We have also linked several million cryptoasset addresses to these businesses. Most of these services are unregulated and can be used anonymously.
- We have directly linked more than 15 million crypto addresses to criminal activity with a link in Russia. Companies and digital asset exchanges can review transactions and wallets for exposure to this activity and ensure that proceeds cannot be laundered.
- We have identified several hundred thousand crypto addresses associated with sanctioned actors based in Russia. This goes beyond those included in the sanctions lists and includes other addresses that we were able to link to these actors through our own analysis.
- We are actively investigating crypto-asset wallets believed to be linked to sanctioned Russian officials and oligarchs. We are working with government agencies and other organizations to ensure that those responsible for the invasion of Ukraine cannot use crypto-assets to hide their wealth.
We are also working on establishing best practices in accordance with the sanctions for cryptoassets, which take into account their unique characteristics. Crypto wallets are fundamentally different from bank accounts. Funds can be moved to thousands of new addresses at the click of a button – meaning that sanctions verification requires more than simply matching client wallet addresses to those published on sanctions lists to be effective. Assets should and can be traced through the blockchain ledger to verify connections to all known and suspected cryptoasset addresses controlled by sanctioned actors.
As an industry, we have the power and responsibility to shape how digital assets are used and prevent them from becoming havens for money launderers and kleptocrats. We now have the opportunity to demonstrate that a crypto-based financial system – with proper controls and protections – will be safer, fairer and less susceptible to abuse than the one we have now.
How we can help
Contact us to learn more about blockchain analytics and how Elliptic can help you implement sanctions compliance controls or download our new and updated A Guide to Cryptocurrency Sanctions Compliance.
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