Coinbase has argued that cryptocurrencies can ensure that sanctions are not dodged and highlighted the dangers of traditional financial mechanisms.
In a blog post, Coinbase made the case for cryptocurrencies as transparent and traceable mechanisms whereas countries who try to launder or avoid sanctions are most likely going to choose traditional financial mechanisms which have been known to lack integrity.
This comes in the context of increased demand to suspend Russian accounts from cryptocurrency exchanges in the context of the Russian-Ukrainian war.
Discussing the current situation in the blog post, Coinbase’s chief legal officer Paul Grewal argues that many sanctioned governments have been able to launder money through traditional means.
“By transacting through shell companies, incorporating in known tax havens, and leveraging opaque ownership structures, bad actors continue to use fiat currency to obscure the movement of funds”, he said.
On the other hand, transactions carried through the public ledger are transparent and “inherently public”; both traceable and permanent.
This argument comes on top of growing fears that the Russian government may choose to use cryptocurrencies to avoid sanctions – an idea that has been struck down by several knowledgeable observers.
One of those objecting to the idea that crypto could be used as a way to avoid sanctions is Jake Chervinsky, a crypto lawyer who argued that using a transparent crypto technology to hide ill-gotten funds was not feasible, as opposed to fiat currencies, which had such mechanisms due to lack of transparency.
According to Grewal, there is no need to impose blanket bans when in reality Coinbase and other companies can actively and successfully monitor transactions and establish which ones come from sanctioned entities.
“We believe we can balance these interests by continuing to support law enforcement efforts while promoting policy frameworks that respect individual privacy”, Grewal concluded.
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