“Cryptocurrencies won’t help Russia evade sanctions,” experts say
Since invading Ukraine, Russia has come under various economic sanctions. In view of this, the possibility of the country using cryptocurrencies such as Bitcoin to circumvent these sanctions began to be raised.
However, for crypto experts, digital assets alone will not allow Russia to circumvent these limitations. That’s because the country’s financial system is strongly linked to the dollar.
To counter Putin’s advances, the United States, the United Kingdom, the European Union and Canada announced new sanctions this week. Nations primarily targeted the country’s central bank and national wealth fund.
Before that, the US and its allies had already removed some Russian banks from the secure messaging network used for international transactions, SWIFT (Society for Worldwide Interbank Financial Telecommunications).
As a result, the ruble plummeted, being unseated even by Bitcoin. In addition, the interest rate soared in the country and the stock exchange remained closed.
While some advocate using digital assets to evade sanctions, experts told Al Jazeera that Russia’s case is different from other countries that use this alternative.
That’s because Russia has less wiggle room given the scale of the economic coup. At the same time, the adoption of digital currencies by Russians is very limited.
According to Ari Redbord of TRM labs, a blockchain intelligence firm, Russia has been deeply rooted in the global financial system for decades, unlike countries like North Korea, Venezuela and Iran that use digital assets to circumvent sanctions.
According to Redbord, 80% of daily foreign exchange transactions and half of Russian international trade are carried out in dollars.
“It is very difficult to move large amounts of cryptocurrencies and convert them into usable currency. Russia cannot use cryptocurrencies to replace the hundreds of billions of dollars that could potentially be blocked or frozen,” he said.
Another fact that is against Russia in this regard is the transparency of blockchain, the technology behind cryptocurrencies.
As Roman Bieda, head of fraud investigations at blockchain firm Coinfirm, highlighted, while sanctioners cannot know who owns the address that sends the cryptocurrency, they can see the volume of the flow. That is, they can track the amount of money that is moved.
So, once a suspicious address is identified, the addresses can be blocked by exchanges. In addition, it is possible to monitor the funds.
Another alternative to accessing cryptocurrencies would be through mining. After all, the oil and gas sector was not targeted by the sanctions, although Shell and BP have announced that they are withdrawing their business from the country.
According to Tom Robinson, co-founder of blockchain firm Elliptic, if future sanctions hit the sector, Russia could use the surplus energy or computing power to generate cryptocurrency:
“Cryptocurrency mining allows them to monetize their energy reserves on the global market without having to move them out of the country,” Robinson said.