What you need to know about today’s Senate hearing on Russia’s illicit crypto use

The Senate Banking Committee is hosting a hearing on crypto’s use in illicit finance on Thursday. The hearing follows up on a wave of speculative worry that Russia will use crypto to evade recent sanctions.

The committee

Certain progressives on the committee — most notably, Elizabeth Warren (D-MA) — have firmly staked out a political base that simply does not like crypto and will almost certainly use the opportunity to denounce the industry writ large.

Indeed, Warren and three of her fellow party members on the committee wrote to the Treasury earlier this month, asking for answers as to the agency’s work on crypto in sanctions evasion, foreshadowing the announcement of this hearing.

There has been speculation that Warren will use the hearing to introduce legislation barring crypto exchanges from operating in Russia. Some aspects of her legislation-in-progress have been reported in the media.

Bitcoin advocate Cynthia Lummis could also use the hearing to speak about aspects of a cryptocurrency bill she has been developing in recent months. The Lummis team declined to share a draft with The Block. Sources tell The Block that the Lummis team has locked up copies of the legislation with permission-limiting software to prevent sharing or even printing of the document. Several in the industry who have seen the omnibus draft are unhappy with provisions in flux, which has apparently resulted in issues getting co-sponsors. Lummis’ team has, however, been feeding more salient proposals to the public piecemeal.

Another critical figure to watch is Robert Menendez (D-NJ). Historically, Menendez has not been all that vocal when it comes to crypto. However, he also chairs the Senate Foreign Relations Committee, in which capacity he has recently had more work in the area. He recently introduced a bill looking to study El Salvador’s Bitcoin use,

In a recent hearing before the Foreign Relations Committee, Menendez said: “We are sanctioning all of the traditional financial and banking systems, but cryptocurrency is an opportunity for oligarchs and others to move in a different direction."

While Banking Committee chairman Sherrod Brown (D-OH) is rarely kind to the crypto industry in public statements — he was, for example, a signatory to Warren’s letter — he has clearly not set up Thursday's hearing to be fire and brimstone for the industry.

The witnesses

When the committee originally announced the hearing, there was only one witness on the docket, Chainalysis founder and CSO Jonathan Levin.

Subsequently, three more witnesses appeared on the roster.

The flagship blockchain analytics firm, Chainalysis has a whole fleet of government contracts and generally serves as a critical go-between when it comes to the US government and the crypto industry — though this same role has generated its own share of animosity within the crypto world.

Speaking with The Block in advance of the hearing, Levin said he’d noticed a “really genuine thirst for knowledge” on the part of both Republicans and Democrats.

As far as whether crypto is actually helping Russia evade sanctions, Levin said: “From what we’ve seen, there haven’t been very large systemic changes in the utilization of the major cryptos post-invasion. That would indicate to me that there’s not a systemic issue here. [But] We’re monitoring very closely.”

Another witness is Michael Mosier, formerly of both Chainalysis and the Treasury’s AML watchdog, the Financial Crimes Enforcement Network. Mosier has publicly questioned the utility of Warren’s focus on crypto.

In an email to The Block, Mosier said: “I'm hoping that the non-political choices of witnesses by each side (I was in the Obama White House but invited by Toomey's staff, and the rest are nonpolitical too) means the point-scoring and sound bites will be limited. But that is hope against experience.”

Also appearing will be Michael Chobanian. The hearing notes identify him as the founder of KUNA Exchange and the President of the Blockchain Association of Ukraine. What they do not note is that KUNA Exchange hosts wallets for the Ukrainian government. Ukraine’s use of crypto donations to fund its defense effort has been one of the key narratives that the crypto industry has seized upon to counter talk of crypto as a sanctions evasion tool.

The final witness is Shane Stansbury, a Duke Law professor who seems to possess the most overall skeptical view of crypto among those testifying. Even at that, Stansbury is hardly strident, acknowledging crypto’s potential but asking the committee to “recognize the serious role that cryptocurrency is playing in criminal activity.”