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The United States Department of Justice (DOJ) has recently launched the KleptoCapture task force. The task force’s aim is to enforce sanctions imposed on Russia for its invasion of neighboring country Ukraine.
Of late, there have been talks that Russia might turn to crypto to circumvent its sanctions. The DOJ’s establishment of KleptoKapture is a move to nip this in the bud.
Efforts to Mitigate Attack on Ukraine
In a press statement released on Tuesday, 2nd March, Deputy Attorney General of the United States, Lisa Monaco, announced that the Department of Justice would be turning its attention to the enforcement of the already imposed sanctions on Russia. Most of the sanctions should aim towards strangling the Russian economy and catalyzing an end to the war.
Sanctions include embargoes on the exportation of goods, travel bans, asset freezes, and other similar measures.
“KleptoCapture” comes from the curious word “kleptocracy,” which describes powerful people who unjustly appropriate funds. According to the statement, the task force’s main purpose is to nab individuals attempting to illegally bypass the sanctions on Russia. However, this one singular function will include a slew of activities, from national security investigations to asset forfeiture. As such, the task force has chosen members from nearly all U.S law enforcement agencies. This means that agents from the FBI to the U.S Postal Inspection Service are also on the team.
Restraining the Russian Crypto Market
Beyond investigating and prosecuting sanction violations, The KleptoCapture Taskforce also aims to clamp down on the use of cryptocurrency to avoid sanction restrictions.
The United States and its allies are attempting to isolate the Russian state from the global market. Isolation could mount pressure on the Russian economy so that it no longer has the resources to maintain its military invasion. So far, the strategy could be proving successful.
Inflation in the region is up by 9.05%, as the US along with the United Kingdom and the European Union have halted transactions with most major Russian banks. As a result, Russians cannot transfer funds outside their country anymore. Additionally, Moscow’s stock market has ceased operations for the second day in a row after recording major losses on Monday. While the value of the Russian Rouble has been on the decline in the past weeks.
Could Russia Turn to Crypto?
Amid rising prices and currency devaluation, there are suggestions that Russia could be turning to a less regulated form of currency, cryptocurrency. Conducting trade using decentralized currency may somewhat cushion the effect of the sanctions on Russia’s economic resources.
While there is no concrete evidence that the country is employing digital currencies in its recent transactions, there are nevertheless subtle indications. In the past week, experts have noticed notable spikes in whale account holdings and transfers. Accounts with more than 1000 BTC (~$43 million) have significantly surged by at least 5% following SWIFT’s exclusion of Russian banks. There have been similar large movements as well, slightly below 1000 BTC.
Part of KleptoCapture’s mission may halt the possibility of Russia using crypto to make trades.
Prior to the DOJ’s announcement, German Minister of Finance, Christian Lindner already acknowledged evasions with crypto were a possibility. The Minister revealed Germany was working with other countries to mitigate this.
Already, U.S President, Joe Biden has called for all cryptocurrency exchanges to ban Russia from conducting transactions on their platforms. His request was echoed by Ukrainian Vice Prime Minister, Mykhailo Fedorov.
Several exchanges already declined to comply with the request, citing that doing this undermined the ethics of the crypto industry. Although key Ethereum structures, MetaMask and Infura, have recently met accusations of cutting off users in sanctioned regions.