Russia has to reckon with numerous international sanctions after invading Ukraine. Will the country use cryptocurrencies to avoid sanctions?

Will Russia use cryptocurrency for international sanctions?

Earlier this week,President Vladimir Putin invaded Ukraine after defining a “military special operation” in a live TV interview. The country was quickly hit by an international backlash and now faces sweeping and sweeping sanctions.

While the European Union imposed sanctions against the Kremlin’s interests, US President Biden condemned the invasion as a premeditated attack. Russia suffered a wave of sanctions against banks and state-owned companies. Nord Stream 2, which aims to increase the flow of natural gas from Germany and Russia to mainland Europe, has stopped approving gas projects. Great Britain has announced that it will impose sanctions on the Russian economy.

The international community failed to comply with the UK’s request to ban Russ from the international SWIFT payments network. But BTC and other cryptocurrencies could offer President Putin a way to avoid international sanctions and the financial costs that come with them.

Caroline Malcolm, Head of International Policy at blockchain analysis firm Chainalysis said:

“Like the traditional financial system, Russia can use cryptocurrency to circumvent sanctions imposed in response to the invasion of Ukraine. Cryptocurrencies do not offer Russia a silver bullet to evade sanctions: just like the traditional financial system, the crypto ecosystem can take steps to identify transactions from sanctioned entities.”

One of the main ways Russia can use cryptocurrencies to evade sanctions, an industry largely fueled by Russian activity, is through ransomware attacks. Some Russian banks sanctioned for Russia’s “special military operation” against Ukraine will be unable to use key payment services like Apple Pay and Google Pay.

Cryptocurrencies weaken US sanctions

Recently, cryptocurrency is gaining attention as a means to easily send money across borders for political purposes. Earlier this month, bitcoin was used to raise funds for a protest movement in Canada that was ordered by the Canadian government to shut down its banks.

Most cryptocurrencies were used this week to transfer over $4.1 million in funds to the Ukrainian military. One of the largest mining pools in Europe has decided to no longer serve Russian customers out of solidarity with Ukraine.

Some believe that Russia could start using cryptocurrencies to circumvent international trade sanctions imposed on the country.

Last October, the Biden administration warned that cryptocurrencies, which the Treasury Department defines as digital assets, could undermine the broader US sanctions regime. The Ministry of Finance made the following statement in its report:

“These technologies create opportunities for malicious actors to hold and transfer funds outside of the financial system. They also strengthen our competitors who are trying to build new financial and payment systems that will diminish the global role of the dollar.”

Sanctions by the United States and other countries targeting the  financial system could accelerate the transition to BTC and crypto assets from the SWIFT payment network. As is known, central banks based in Belgium in the US, Japan and Europe control SWIFT, the messaging network banks use to transmit money transfer information.

According to the Bank for International Settlements (BIS), European banks make up the bulk of the roughly $30 billion foreign banks with exposure to Russia.

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