Tuesday 15 March 2022 4:39 pm | Updated: Tuesday 15 March 2022 4:40 pm

Hundreds of thousands of crypto addresses linked to sanctioned Russians

As Bitcoin makes a lower low and tries to find an area of demand, it seems the investment phrase “sell in May and go away” is being front run. Is this the beginning of a period of consolidation for crypto after several months of “up only?” Or, are markets simply de-risking ahead of today’s Federal Reserve meeting to determine interest rates?

Several hundred thousand crypto wallets have been linked to Russia-based individuals facing sanctions amid conflict with Ukraine.

Research firm Elliptic has identified 15m crypto addresses connected to illicit activity in Russia in addition to hundreds of thousands of addresses belonging to sanctioned individuals, many of which are not included on official lists. The firm said it is collaborating with law enforcement and governments to investigate crypto addresses linked to Russian oligarchs and politicians.

“The war in Ukraine has demonstrated that powerful technologies such as cryptocurrency can be used in both positive and negative ways,” commented the chief executive of Elliptic, Simone Maini.

Crypto and sanctions

While the Ukranian government has received donations totalling $54m in crypto to support humanitarian efforts, the volume of Russian rubles being traded for digital assets surged threefold in the immediate aftermath of the invasion.

“Soaring trading volumes indicate that ordinary Russians are bypassing oppressive capital controls and fleeing the devaluing Ruble for the haven of cryptocurrency,” Maini commented.

According to Elliptic there is a high risk of Russia using digital assets to circumvent sanctions through state-sponsored cybercrime, concealment of wealth, and even crypto mining.

Regulation

Amid the conflict UK regulators are turning a spotlight on crypto assets. The UK’s Economic Crime Bill, which received royal assent on Monday, grants the state with new powers to seize crypto assets. Meanwhile, the Bank of England and Financial Conduct Authority have called on crypto firms to enforce sanctions, warning they could face legal repercussions.

In a bid to clamp down on illicit transactions the National Crime Agency (NCA) has called for regulation of crypto mixers, protocols which conceal the audit trail of crypto transactions when assets are transferred from one address to another.

While mixers offer privacy when trading on public blockchains like Bitcoin and Ethereum regulators are concerned about their potential for enabling illicit activity including sanctions evasion.

“Though ‘privacy’ is often cited as a means for using mixers, it is our assessment that they are utilised by criminals to launder money,” Gary Cathcart, the head of financial investigation for the NCA told City PM.

“When it comes to crypto transactions, the owner’s identity is already obscured, and the reality is that prying eyes would need additional, hard to get information, to determine a wallet’s balance and its owner,” Cathcart added.

Elliptic has identified over 400 exchanges which allow crypto to be exchanged for Russian rubles, the majority of platforms can be accessed anonymously.