Blockchain-based fundraising and cyberlaundering. The role of crypto amid Russia-Ukraine conflict and EU financial sanctions

Abstract

This dissertation examines the risks and occurrence of money laundering through cryptocurrencies, with an emphasis on their involvement in the conflict between Russia and Ukraine, primarily as a potential means of circumventing the European Union's economic and financial sanctions against Russia. For this purpose, the technology underlying the execution of this instrument was analysed, namely the network of distributed ledgers (DLT) and the mechanism of a Blockchain, identifying its main components, the various protocols and smart contracts that govern the system. The first cryptocurrency was introduced in 2008, and significant issues had immediately emerged in terms of retail investors protection, transparency, and money laundering; however, a regulatory gap persisted for a considerable amount of time until the Proposal for a Regulation on Markets in Crypto-Assets, commonly known as MiCaR, was published in 2020. The conflict prompted the authorities in charge of supervising the financial system to expedite the implementation of the Proposal, which was approved by the Council on October 5th 2022, and is currently pending approval by the European Parliament. Along with the Anti-Money Laundering and Terrorist Financing (AML/FT) Directives, the MiCaR would provide a significant level of protection from the risks associated with crypto-assets; nonetheless, the technology powering these instruments is constantly and rapidly evolving, reason for which the potential collateral risks of innovation, loopholes, as well as suggestions for future approaches and improvements to the current regulatory framework, were evaluated.