Cryptocurrencies could be in danger once used by Russia to avoid sanctions

Russia can switch to cryptocurrencies if it is excluded from the SWIFT payment system. Analysts have warned that if Russia can use cryptocurrencies to evade sanctions, “US political support for cryptocurrencies will decrease and regulatory risks will increase.”

Cryptocurrencies are subject to legal risks

Amid growing discussions about Russia’s banning from the global interbank payment system SWIFT following the invasion of Ukraine, some analysts have warned that Russian President Vladimir Putin could move to using cryptocurrencies to evade sanctions.

Jaret Seiberg, analyst at Cowen Washington Research Group called on Friday:

“We believe Washington is concerned that Russia will use cryptocurrency  to circumvent sanctions. And if that happens, then we believe US political support for crypto will decrease and regulatory risks will increase.”

With the bulk of global trade still denominated in dollars, Seiberg says wanting to use cryptocurrencies to “dodge” SWIFT will be a challenge for Russia.

“Bitcoin payments require a dollar conversion, which provides a way to track activity… That also benefits crypto.”

However, if Russia fails to use cryptocurrency to “circumvent the law,” analysts believe it could increase cryptocurrency’s presence in the eyes of regulators.

Seiberg stated that political support for cryptocurrency will increase as crypto exchanges help maintain US sanctions and as governments can track circumventions through the use of blockchain.

Analyst Cowen warns:

“For cryptocurrencies, this could be the defining crisis of how governments deal with their use for payments and as a store of value. Exchanges and wallets will come under pressure… This will not only happen in the USA. We hope it will also be embraced in the UK, EU and Western allies in Asia.”

The US Treasury sanctioned two Russian cryptocurrency exchanges last year. Suex and Chatex were found to have been processing transactions related to ransomware attacks and other illegal activities. The agency also identified cryptocurrencies as a major threat to sanctions programs in a report released last year.

“We recognize the risk that these digital assets and payment systems could reduce the effectiveness of sanctions if left unchecked.”

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