WASHINGTON — Crypto currencies pose a threat to U.S. sanctions and the dollar’s dominant role in the global economy, the Treasury said this week, and the U.S. has to adopt more safeguards to protect national security.
One of the biggest threats arising from new forms of electronic money, U.S. officials say, is that they could weaken sanctions on countries, companies and individuals the U.S. seeks to punish. The U.S. has more than 9,000 sanctions in place.
“The advent of crypto currencies makes it harder for sanctions to be effective,” deputy U.S. Treasury Secretary Wally Adeyemo told a Senate committee at a hearing this week. His testimony coincided with a Treasury report on how crypto could undermine sanctions.
Another worry: Digital currencies such as Bitcoin BTCUSD, +3.98% enable individuals and groups to engage in cybercrimes and circumvent the traditional dollar-based financial system to cover their tracks.
Take the growing spate of so-called ransomware attacks. Cybercriminals are hacking into large computer systems and demanding ransom payments from the victims in untraceable crypto currencies.
Just this week, the large TV station owner Sinclair Broadcast Group SBGI, +3.06% was hit by a large ransomware attack that temporarily took some of its 185 stations off the air. And during the summer, a devastating ransomware attack on Colonial Pipeline caused widespread gasoline shortages in the Southeast.
Ransomware groups have collected hundreds of millions of dollars through crypto payments, Adeyemo noted.
Digital currencies have seen their popularity surge in the past several years. Americans and others across the world have rushed to get in on crypto. Digital coins aren’t tied to central banks and users contend transactions are more secure.
A Senate crypto-currency hearing on Tuesday was aimed at trying to figure out ways to modernize U.S. sanctions and ensure they remain effective. The Biden White House and congressional lawmakers worry digital currencies could pose a big threat to national security if left to grow unchecked.
One option the Treasury has been considering are sanctions on crypto-currency companies that facilitate ransomware payments.
What is even more critical, Adeyemo said, is to strengthen alliances with other countries because many cybercriminals live and operate outside of the United States.
It’s hard enough for criminals to engage in transactions that avoid the use of the dollar, he said, but it’s even harder if they can’t use “the euro, the pound or the yen” to conceal their behavior.
Imposing sanctions together with allies “makes it easier for us to hold our adversaries accountable,” Adeyemo said.
Some senators also expressed worry that the rise of alternative payment systems, such as China’s digital yuan, could threaten the dollar’s status as the world’s reserve currency. The dollar’s reserve status gives the U.S. a big economic advantage over other countries.
Yet Adeyemo asserted the dollar would remain the world’s reserve currency because most countries and businesses “trust” the U.S. for the strength of its economy and the certainty of its laws.