US: "Rise of Virtual Currency Undermines Effectiveness of Economic Sanctions"

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Suhwan] The U.S. Treasury Department has analyzed that the rise of cryptocurrencies and the decline in the use of the U.S. dollar are diminishing the effectiveness of the U.S. government's sanctions, calling for a more diversified approach.

On the 18th (local time), the U.S. Treasury Department released a report stating, "Technological advancements are encouraging adversaries to seek alternatives for financial transactions outside the U.S.-led financial system," warning that "this is weakening the effectiveness of the U.S. government's economic sanctions."

Wally Adeyemo, Deputy Secretary of the U.S. Treasury, told reporters that day, "To ensure the sanctions we impose are effective, several issues must be addressed," pointing out that "risks are increasing due to the emergence of digital assets and new payment methods."

Deputy Secretary Adeyemo said, "If these risks are not resolved, they will adversely affect the effectiveness of our sanctions."

He added, "Careful coordination is necessary to ensure that economic sanctions do not hinder humanitarian aid."

This warning from the Treasury Department came amid the emergence of new means of fund distribution such as cryptocurrencies, which is shaking the status of the U.S. dollar. Analysts say that as adversaries and terrorist organizations of the U.S. find new ways to bypass the U.S. dollar to transfer funds, the effectiveness of U.S. economic sanctions is also declining.

In fact, Iran, a major target of U.S. sanctions, has been exporting up to one million barrels of oil daily to countries including China despite ongoing U.S. sanctions on its oil exports since 2018.

During the administration of former President Donald Trump, up to 1,000 sanctions were imposed annually, but there has been criticism that these measures did not produce substantial effects relative to their volume.

In particular, China is advancing the development of its own central bank digital currency (CBDC), and the U.S. Treasury views this as a threat to the international financial system based on the U.S. dollar.