U.S. GAO performed ‘0 analysis’ for crypto report on evading sanctions: Coinbase CLO

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Coinbase chief legal officer Paul Grewal came down heavily on the United States Government Accountability Office over its recent report on crypto use for evading sanctions.

In an X post on Jan. 22, Grewal said that the U.S GAO carried out zero comparative analysis only to “harangue an industry that spends millions and millions to follow the law.” He pointed out that even in the report itself, buried deep in the links behind the clickbait are “admissions that digital assets are a relatively poor way to circumvent sanctions.”

The U.S. GAO report in question was published on Dec. 13 last year, and on Jan. 16, the GAO published the federal response to this issue on the issue. The GAO report claimed that there have been several instances where foreign states facing U.S. sanctions used cryptocurrencies like Bitcoin (BTC) to bypass the sanctions imposed on them.

An excerpt from the report read:

“Digital assets like Bitcoin and other virtual currencies pose risks to implementing and enforcing U.S. sanctions, but several factors partially mitigate these risks (see table). A key feature of digital assets is enabling users to rapidly transfer value across countries’ borders.”

However, in the same report, the GAO admits that cryptocurrencies decentralized nature and public ledger could enable “U.S. agencies and analytics firms to trace transactions and potentially identify illicit actors.”

Apart from that, the report admits that using digital assets as a means of payment is limited. The report also noted that implementing global standards may increase compliance with Anti-Money Laundering requirements.

Despite these facts, the report was used by an anti-crypto Senator, Elizabeth Warren, for fear-mongering against the nascent industry and claimed she has a bill in the making to ensure crypto companies follow the same AML regulations as other financial institutions.

However, people were quick to point out to her that the very article Warren is using to paint crypto in a bad light offers just one instance of using cryptocurrencies to avoid sanctions and the party involved was Chinese.

Major government regulatory bodies and policymakers are already either working or have already implemented key frameworks focusing on implementing Anti-Money Laundering guidelines. Europe has already passed the market in crypto assets (MiCA), while Asian countries such as Hong Kong, Japan, and Singapore have also implemented strict regulations for crypto service providers.

Related: CoinEx hack: Compromised private keys led to $70M theft

Another major factor that most of these reports miss is the fact that the percentage of crypto used for illicit activities is less than 1% of the total circulating supply, a significantly lower portion when compared to cash. There have been several instances where stolen or hacked crypto funds have taken years for the perpetrators to move due to the public ledger system, and even in those cases, they are identified and often blocked by crypto exchanges.

Crypto user for illicit use. Source: Chainalysis

On the other hand, U.S. is yet to finalize and uniform crypto regulations for the country despite several policymakers demanding one for quite some time. There are still certain regulatory policies in place to govern crypto service providers.

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