Moderate Uptick In Cryptocurrency-Led Illicit Finance, But Volume Small: Report

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US officials have observed an uptick in the use of digital assets to facilitate illicit finance since Russia invaded Ukraine, but the transaction volume is too small to play a big role in helping Moscow evade sweeping sanctions, a senior Treasury official said on Friday.

Nellie Liang, Treasury undersecretary for domestic finance, said the current state of digital assets would not be large enough to run an economy on, and that the ecosystem is too underdeveloped for individuals to effectively evade sanctions using such assets.

"The transaction size we've seen is fairly small," Liang told Reuters in an interview. "Of course, we recognize we may not see everything, but there is a fair amount of oversight. At this point, we just don't see that it could be used in a large-scale way to evade sanctions."

Liang said the Treasury has been studying the issue for years, and that Group of Seven advanced economies and other countries have also raised concerns about use of digital assets for illicit finance, making effective enforcement imperative.

"People are very aware of it, and paying attention to it," she said. "While it's growing because the use of crypto is growing, its share as a medium for illicit finance is not anywhere as large as just using cash."

US Treasury Secretary Janet Yellen earlier this month vowed to address potential gaps in tough sanctions slapped on Russia following its Feb. 24 invasion of Ukraine, and said there were anti-money laundering laws in place to prevent members of Russia's elite from using cryptocurrencies to evade those measures.

Russia calls its actions in Ukraine a "special military operation" that is not designed to occupy territory but to destroy its neighbor's military capabilities.

Despite repeated