Russia can use cryptocurrencies to mitigate the impact of international sanctions
Russia’s invasion of Ukraine has drawn widespread and far-reaching sanctions from the West. While the European Union imposed sanctions aimed at “Kremlin interests”, the US announced a wave of sanctions targeting Russian banks and state-owned enterprises, especially money transfers through the Russian Federation. traditional banking system. Germany and the UK have also announced sanctions targeting the Russian economy. But there is growing consensus that Russian entities can use cryptocurrencies to mitigate the impact of these sanctions. Many believe that Russian banks and oligarchs can pour money into Bitcoin and other cryptocurrencies to avoid the impact.
To pressure a country to comply with international law and its requirements, the United States often uses sanctions, a powerful diplomatic tool, as the U.S. dollar is the reserve currency. preferred storage in the world and the most widely used means of cross-border payments globally. . However, US officials also believe that the rise of cryptocurrencies threatens their dominance and lessens the impact of these sanctions.
For the sanctions to take effect, they need banks and other financial institutions to monitor the flow of money, so that transactions can be blocked with the sanctioned entities. However, cryptocurrencies allow sanctioned entities to bypass the banking system and thus make it difficult to track transactions.
Cryptocurrency advocates often cite this characteristic of the crypto industry to say that it allows for an independent way of doing business. But this same feature can now allow sanctioned entities to transact business under control.
The key for Russia to avoid these sanctions is not to conduct trade in US dollars. Russia may have gambled on these scenarios and is therefore developing its own central bank digital currency (CBDC), a “digital ruble”. There is also the possibility of hacking these digital assets, which would allow Russian entities to recoup revenue lost due to sanctions.
Cryptocurrency transactions require data entry into the blockchain, which makes them transparent. It is safe to say that Russian technologists can develop tools that can hide these transactions long enough to lessen the impact of sanctions.
