USA: Digital Asset Sanctions Compliance Enhancement Act of 2022

On March 17, 2022, a bill on measures regarding the use of cryptocurrencies and other digital assets for conducting transactions by sanctioned Russian individuals and for other purposes was submitted to the US Congress.

It is supposed to collect information about all service providers with crypto assets that are related to Russia. Also, the US Treasury will have the right to prohibit such providers from conducting transactions at addresses that are associated with Russia. In this context, regulation sounds extremely harsh and can lead to blocking even those crypto transactions that are not directly related to the sanctioned persons. The bill affects not only organized sites, but also DeFi services, any kind of exchangers, applications, etc.

From the available text of the bill follows:

The broadest definition of digital assets is given – it is a digital expression of value, financial assets and instruments, or rights of claim used for payments or investments or for transfers or exchange of funds or their equivalent, issued or presented in digital form through the use of distributed registry technology.

Definitions of the following concepts are also given:

A platform for trading digital assets (digital asset trading platform) which includes exchangers and trading platforms where digital assets are traded and loaned.

Intermediaries in transactions with digital assets (digital asset transaction facilitator– are persons who significantly contribute to the purchase and sale, loans, exchanges, storage, holding, validation or creation of digital assets at the expense (in favor of) other persons, including exchange protocols, decentralized finance technologies, smart contracts and other software, including open source – reproduced through the use of distributed ledger technology or similar and providing a mechanism for numerous users to buy, sell, borrow or trade digital assets. Intermediaries may be other persons who, according to the Ministry of Finance, significantly contribute to transactions with digital assets bypassing sanctions.

It is envisaged that within 90 days from the date of adoption of the law and thereafter, the US President will periodically submit to Congress a report on the identification of persons who are operators of trading platforms and intermediaries in transactions with digital assets and who have significantly contributed to any sub-sanctioned person, including bypassing (to circumvent) sanctions against the Russian Federation. At the same time, the President of the United States is granted the right to block and prohibit transactions with property and property rights of a foreign person if they are located in the United States or are owned or controlled by residents of the United States. In addition, liability measures provided for by US law may be imposed.

Also, the US Treasury may require that no platform or intermediary for transactions with digital assets doing business in the United States make transactions with digital assets at addresses that may be associated with persons living or located in Russia, if the Ministry of Finance considers that this is important for the national interests of the United States. This provision is formulated as broadly as possible and, if applied, means the requirement to block virtually any transactions of any Russian users on the side of sites and intermediaries conducting their business, among other things, in the United States.

It is established that no later than 120 days from the date of adoption of the law, FinCEN must require citizens (and persons with a residence permit) and US companies (and US branches of foreign companies) involved in transactions worth more than $ 10,000 with digital assets through accounts outside the United States to submit a corresponding report.

We will inform you about changes to the draft law, its passage and adoption in addition. We stay in touch with all questions!