Ipek Ozkardeskaya, an analyst at Swissquote Bank, said, “Since the Bitcoin network and cryptocurrency transactions are not censored, Bitcoin could be a potential safe haven for Russian oligarchs to avoid sanctions.” Cryptocurrencies are beyond the control of banks and states because of blockchain technology. The mere assumption that Russian billionaires can increasingly use digital currencies as a safe haven has caused prices to skyrocket. The U.S. also appears to view cryptocurrencies as blockchain enablers. According to reports from Washington, a strategy is being developed to prevent Russia from using Bitcoin to circumvent imposed sanctions. This will draw on the experiences of Iran and Venezuela, and there are also sanctions in place. He said the government wants to ensure that sanctions against Russia have maximum effect.
Western nations recently decided to exclude some Russian banks from the international Swift payment system and freeze the Russian Central Bank’s assets. As a result, the Russian currency, the ruble, depreciated significantly. However, the economic sanctions only take effect if payments are actually made through a state-owned bank.
Russian users locked out
For this reason, Ukraine’s Deputy Prime Minister Mykhailo Fedorov on Sunday called on “all major crypto exchanges to block addresses of Russian users.” However, Binance, one of the world’s largest exchanges, initially disagreed: “A unilateral decision to ban people from accessing their cryptocurrencies would be against the very reason cryptocurrencies exist.” The exchange Kraken also announced that in the absence of legal obligations, it will not freeze the accounts of its Russian customers. The U.S. exchange Coinbase has also said it does not want a blanket ban on all Coinbase transactions with Russian addresses.
Whether the use of cryptocurrencies to circumvent sanctions will actually succeed, however, is questionable. “Should Russia succeed in participating in economic life with the help of crypto-assets despite a possible Swift exclusion, a global regulatory shock looms,” says Timo Emden, an analyst at the eponymous analytics service. “It shouldn’t be long before the thumbscrews that have already been applied are tightened.” Without Swift, it also seems unlikely that Russia will actually use cryptocurrencies as a normal payment method, at least in the short term.
“Russia first has to build the necessary infrastructure to be able to use Bitcoin as a general means of payment,” Philipp Sandner, an economist at the Frankfurt School of Finance & Manegement, told “Manager Magazin.” Similar to PayPal, the Russian government must first provide all citizens and businesses with a “gateway” for payments. “This is more likely to take 12 months than six.”
Cryptocurrencies have been on the rise since the war in Ukraine began. Experts suspect that this is an attempt to circumvent Western sanctions against Russia. The U.S. now wants to do something about that. After the Russian attack on Ukraine, more and more investors are stocking up on cryptocurrencies, which has caused BTC to increase in price by more than 25% since the start of the war, as Coinbase announced. ETH also gained significantly since the end of February.
War and sanctions are driving massive amounts of money into the crypto sector – understandably, BTC trading has increased significantly in Russia and Ukraine. Transactions between rubles and cryptos have doubled to $60 million a day since the invasion, according to research group Chainalysis – with Ukraine’s Kuna crypto exchange even tripling its daily trading volume.