US Treasury says it must ‘modernize and adapt’ to digital currencies

The United States Department of the Treasury has issued a review on sanctions and suggested the government do more to develop its infrastructure and policies in regards to digital assets.

In a report on Monday, the Treasury Department said the growing use of digital assets was hampering the implementation of sanctions while balancing funds from legitimate humanitarian organizations. The department suggested that better communication between itself and the crypto industry, financial institutions and others in addition to “deepening its institutional knowledge and capabilities” could help improve current policy.

“Sanctions are a fundamentally important tool to advance our national security interests,” said Deputy Treasury Secretary Wally Adeyemo. “Treasury’s sanctions review has shown that this powerful instrument continues to deliver results but also faces new challenges. We’re committed to working with partners and allies to modernize and strengthen this critical tool.”

The report added:

“If left unchecked, these digital assets and payments systems could harm the efficacy of our sanctions.”

According to the report, the Treasury Department suggested the government adopt a structured policy framework, coordinate with allies and partners when possible, ensure sanctions are understood, enforceable and adaptable, and implement them “to mitigate unintended economic, political, and humanitarian impact.” The department added it should modernize to include the “right expertise, technology, and staff” to handle the challenges of digital assets.

Related: Rogue states dodge economic sanctions, but is crypto in the wrong?

The U.S. Treasury Department has been employing sanctions as part of the government’s efforts to fight ransomware attacks threatening the country’s infrastructure — e.g., when Russia-based DarkSide hackers attacked the Colonial Pipeline system in May. Last month, the department announced it would impose sanctions on the Czech Republic as well as Russia-based business Suex OTC for allegedly allowing hackers to access cryptocurrency sent as payment for ransomware attacks.