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In a July 2021 interview, Massachusetts Senator Elizabeth Warren likened crypto regulation to the drug regulation initiatives of a century ago, which she claimed put an end to the sale of “snake oil” and laid the basis for the creation of the modern drug industry. This reflected her earlier statements about the digital currency market resembling the “Wild West,” which makes it a poor investment as well as an “environmental disaster.” With her latest bill in the Senate pipeline targeting Russian actors’ potential use of crypto to circumvent United States sanctions, it is fair to ask: Is the military conflict in Ukraine merely an excuse for Warren to act on her long-standing distaste for digital assets?

From the ivory tower to Capitol Hill

Senator Warren is not a typical Democrat, having been a conservative for much of her life. The general idea behind a lot of the ideas she presents hearkens back to the progressive era, when America’s traditional middle class found itself pitted against the well-lobbied interests of big business and turned to regulation to formalize the national economy.

As a Harvard Law School bankruptcy professor, she wrote several books that established her as a champion of the middle class and new financial regulation, and her ideas gained resonance during the subprime mortgage crisis that would snowball into the 2008 financial crisis.

That year, the U.S. Senate turned to Warren to chair the Congressional Oversight Panel, which oversaw the implementation of the Emergency Economic Stabilization Act, the infamous $700 million bailout package. This set the stage for her entry into politics several short years later when she became a Massachusetts senator at age 63.

“As a member of the Senate Committee on Banking, Housing, and Urban Affairs, Senator Warren works on legislation related to financial services and the economy, housing, urban development, and other issues, and participates in oversight of federal regulatory agencies,” according to her Senate website.

Only business regulation, nothing personal

One important takeaway from a review of Senator Warren’s resume is that the champion of financial regulation and tireless defender of the U.S. middle class has never really been an anti-Russia hawk. However, this seemingly changed when Russian President Vladimir Putin launched his “special military operation” in Ukraine on Feb. 24 and the U.S. and its partners took punitive steps targeting the Russian economy.

The fact that Warren was able to deliver a comprehensive set of regulations aimed at the crypto industry within weeks of the launch of the Ukraine conflict underscores that she had likely drafted them long in advance and had been waiting for the appropriate time to reach across the aisle for Republican endorsement.

Prior to former U.S. President Donald Trump’s arrival on the Republican political scene, antipathy toward Russia wasn’t considered partisan or limited to the Democratic Party. A review of the Senate’s anti-Russia rhetoric, and who signed what documents, reveals that it takes three forms.

The first is unanimous condemnations of Russia, which usually happen immediately after Russia makes a major political move against a foreign power such as Ukraine or Georgia.

The second type is tied to allegations that Putin meddled in the 2016 U.S. presidential election in order to ensure Trump’s victory. While most Republicans dismiss the allegation, it has continued to be a rallying cry for many Democrats. In his investigation into the matter, former Federal Bureau of Investigation Director Robert Mueller found that Russia carried out a systematic effort to influence the election in favor of Trump, but he stopped short of determining whether the efforts were actually successful.

On the other hand, several Republican hawks are decidedly anti-Russia, and these Senators may prove instrumental in the passage of Warren’s legislation. While John McCain, arguably the most famous anti-Russia hawk, passed away in 2018, there are other, lesser-known ones.

In December 2016, after Trump’s election, Senators Rob Portman of Ohio and Dick Durbin of Illinois, co-chairs of the Senate Ukraine Caucus, led a bipartisan group of 12 Republicans and 15 Democrats to call on then-President-elect Trump to continue America’s “tradition of support for the people of Ukraine in the face of Russian aggression.” While most of those senators are still in office, Warren was not among the signatories.

In March 2022, the Senate condemned Russia on two occasions. Both times, the resolution’s sponsor was Senator Lindsey Graham, the most ardent Republican anti-Russia hawk. While Warren voted for the resolutions, she wasn’t among their many cosponsors.

Civil forfeiture: An ugly precedent

There is a precedent for what Warren seeks to do to rein in crypto. For over two decades, U.S. federal officials have been seizing undeclared currency from people at airports traveling to or from other countries. The official justification for the practice is that it curtails the sale of illicit narcotics. If officials find more than $10,000 in undeclared cash on someone, they are authorized to simply take it, and getting it back can be a legal nightmare.

According to a July 2020 report from the civil liberties law firm Institute for Justice, “Law enforcement agencies routinely seize currency from travelers at airports nationwide using civil forfeiture — a legal process that allows agencies to take and keep property without ever charging owners with a crime, let alone securing a conviction.”

The sheer volume of cash being taken at U.S. airports is mind-boggling: more than $2 billion between 2000 and 2016. However, the report notes that 69% of the time, there were no arrests made.

“The theory behind civil forfeiture is that by going after drug dealers’ money, you hit them where it hurts the most by taking away their proceeds,” Jennifer McDonald, a senior research analyst at the Institute for Justice who authored the report, told NPR in a July 2020 interview. “It’s not effective. There’s research that shows that civil forfeiture has no relationship with reducing crime at all, or drugs for that matter.”

Warren’s legislation also resembles the 2001 USA PATRIOT Act, which enhanced both the surveillance and regulation of international banking, supposedly in order to thwart the financing of terrorist activity. Title III prevents U.S. entities from working with offshore shell banks that are unaffiliated with a bank on U.S. soil, ostensibly in order to control suspicious activity abroad. The law mandated that banks investigate accounts owned by political figures suspected of past corruption.

It’s notable that while many went on to later condemn the PATRIOT Act, its initial reception was positive among both Republicans and Democrats due to the sense of urgency that prevailed following the terror attacks of Sept. 11, 2001.

Excuse to target crypto?

Given her history, it’s possible — perhaps even likely — that Senator Warren’s proposal is simply an excuse to target crypto, using Russia as a way to gain bipartisan support. Moreover, Warren’s efforts may be no more effective at its goals than civil forfeiture is at targeting drug trafficking. According to Jake Chervinsky, head of policy at the Blockchain Association, existing legislation targeting Russian entities is sufficient because crypto markets are too small and transparent to rescue the effectively blockaded Russian economy.

Transactions involving Bitcoin (BTC) and the Russian ruble lack liquidity. Chervinsky also noted that “To make a meaningful difference, Russian SDNs [Specially Designated Nationals] would have to convert billions of dollars worth of rubles into crypto” and pointed out that Russia is already cut off from most of the crypto industry. The nation may not even need to turn to crypto, given the willingness of China and India to pursue de-dollarization in trade, a process that has been in the works for years.

Senator Warren’s push for new crypto regulations thus looks like it may simply be a thinly veiled attack on the industry. In an evenly split Senate, her use of heavily sanctioned Russia looks like a potential excuse to drum up bipartisan support for more restrictive measures.