Russia Could Use Bitcoin to Avoid Western Sanctions After The Invasion of Ukraine.

With cryptocurrencies increasingly being viewed as a potential hedge to fiat-induced economic difficulties, one does not need to look further as to how Russia will view digital assets during its current tensions with NATO.

On Thursday, Russia’s forces officially set foot on Ukrainian territory in one of the most audacious annexation efforts in history, putting an end to months of speculation about an invasion and unleashing a slew of penalties against Russia from NATO and its partners.

The first round of sanctions was imposed by the United States on Monday, when the President issued an executive order “Blocking Property of Certain Persons and Prohibiting Certain Transactions” in response to Russia‘s refusal to back down from its attempts to sabotage Ukraine’s sovereignty and territorial integrity.

This comes after Putin attempted to declare the so-called Donetsk and Luhansk People’s Republics (DNR and LNR) as “independent” nations and sent troops to these areas. This morning, EU leaders promised to “agree on the harshest package of sanctions we have ever implemented” in an effort to get Putin to back down.

President Putin, on the other hand, appears unfazed in his annexation ambitions, pledging to keep the ball rolling. Some relate this audacity to the country’s recent forays into cryptocurrencies, particularly Bitcoin, which might serve as a shield against sanctions.

“Russian companies have many cryptocurrency tools at their disposal to evade sanctions, including a so-called digital ruble and ransomware,” according to the New York Times.

“When the United States barred Americans from doing business with Russian banks, oil and gas developers, and other companies in 2014, after the country’s invasion of Crimea, the hit to Russia’s economy was swift and immense. Economists estimated that sanctions imposed by Western nations cost Russia $50 billion a year. Since then, the global market for cryptocurrencies and other digital assets has ballooned. That’s bad news for enforcers of sanctions, and good news for Russia.”

Unlike other countries, Russia has taken a positive stance toward cryptocurrencies. President Putin’s recent initiative to accelerate the development of a legal and financial framework for Bitcoin has been regarded as a pre-emptive strike by the West in response to his planned moves in Ukraine.

Russia is also the third-largest Bitcoin mining country, with a recent Bloomberg analysis revealing that the country’s residents own cryptocurrencies worth more than $214 billion, accounting for almost 12% of the entire global crypto asset value.

Given the fact that cryptocurrencies are permissionless, analysts believe the country will be able to maneuver the restrictions imposed on it. Russia may potentially receive backing from other countries, like Iran and China, both of which have been sanctioned by the United States.

Furthermore, according to a recent research by the Centre for a New American Security, cryptocurrencies have the potential to mitigate the consequences of US sanctions since nation-states may conduct transactions without using the global financial system.

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Patrick

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