In a first, Treasury Department sanctions major cryptocurrency mining firm

The Treasury Department on Wednesday sanctioned major cryptocurrency mining company BitRiver for helping to facilitate the evasion of sanctions against Russia. The action marks a significant step by the agency in its crackdown on cryptocurrency technology used for illicit means and its first sanctions against a mining company.

“By operating vast server farms that sell virtual currency mining capacity internationally, these companies help Russia monetize its natural resources,” the Treasury press release states. “However, mining companies rely on imported computer equipment and fiat payments, which makes them vulnerable to sanctions.”

BitRiver, which was founded in Russia in 2017 and moved to Switzerland last year, has three Russian offices. The company also has 10 Russia-based subsidiaries, which Treasury additionally designated in Wednesday’s sanctions.

Researchers at crypto-tracking company Chainalysis found earlier this year that a significant amount of cryptocurrency tied to illicit actions passes through Moscow-based companies. But the percentage of cryptocurrency transactions that are tied to illicit activity is surprisingly small. Large-scale transactions like the ones needed for Russian oligarchs to launder money would likely be easily spotted by observers, researchers at Chainalysis have argued.

That could change, however. Asset trading volumes in cryptocurrency spiked following the introduction of sanctions against Russia and other financial restrictions related to the war in Ukraine, according to a recent International Monetary Fund report.

Wednesday’s sanctions draw a clear line in holding the cryptocurrency industry responsible for complying with financial sanctions.

“The United States is committed to ensuring that no asset, no matter how complex, becomes a mechanism for the Putin regime to offset the impact of sanctions,” the release states.

Compliance across the cryptocurrency industry has been mixed. Many of the major cryptocurrency exchanges have said they comply with U.S. sanctions. Tornado Cash, a major firm that mixes cryptocurrency by blending funds to increase anonymity, recently argued that it’s not able to enforce sanctions because of the nature of its technology.

Wednesday’s sanctions also included a Russian bank, entities owned by a Russian oligarch and those acting on his behalf, including a fake think tank.

In a statement to CyberScoop, BitRiver’s CEO and founder Igor Runets denied that the company ever provided services to the Russian government or customers sanctioned by the United States.

Runets accused the U.S. Treasury Department of interfering unfairly with competition in the crypto mining industry, calling the sanctions an “attempt to change the global balance of power in favor of American companies.”

Updated 4/21/2022: To include comments from BitRiver.