Us Treasury: Digital currency and reduced use of us dollar could weaken sanctions

Spark Global Limited reports:

The rise of digital currencies and the decline in the use of the dollar is prompting the US Treasury to examine the effectiveness of its sanctions. In a report published on Monday, the Us Treasury said:

“We note that these digital assets and new payment systems, if left unchecked, could undermine the effectiveness of our sanctions.”

Wally Adeyemo, deputy Treasury Secretary, said:

“In order to keep the sanctions effectively, we need to solve some key problems: the emergence of the new payment systems, digital assets, network crime, strategic economic competition and various needs careful calibration, in order to prevent the risk of rising and ensure that sanctions will not hinder the lawful humanitarian assistance to the people who need help.”

While the dollar remains the world’s reserve currency, technology has made it easier to look beyond the US financial system. One person familiar with the matter said the trend meant the Treasury needed to update its operations to keep them modern and develop a workforce and technology infrastructure that could cope with increasingly complex financial situations.

One of the main targets of THE U.S. sanctions policy is Iran, which has managed to increase its oil exports to nearly 1 million barrels a day, even though its energy sector has been severely restricted by the U.S. since 2018.

The US still has the advantage that many of its adversaries will eventually want to convert their assets into dollars, which means it can be in a better position to enforce cross-border sanctions and track illicit transactions by other countries.

Adyermo is understood to have begun a review of the Treasury Department’s sanctions efforts earlier this year to look at all current plans, staffing and budgets. In some cases, the increased scrutiny will lead to a surge in the burden on financial institutions, as banks and other entities must ensure that they do not invest or lend money targeted by the Treasury.
In an October 2020 report, LexisNexis Risk Solutions estimated that financial institutions in the United States and Canada spent $42 billion on financial crime compliance, including sanctions and anti-money laundering efforts, in 2020, a one-third increase from the previous year.