A lot of attention worldwide has been directed towards the Russian-Ukrainian war as a majority of the governments show solidarity with Ukraine. One of the critical areas of focus has been cryptocurrency. The regulators maintain that Russia is using digital assets to evade sanctions. As a matter of fact, in a press conference held on March 10th, the European Central Bank President Christine Lagarde remained adamant that Russian businesses and individuals attempt to circumvent sanctions by using cryptocurrencies.
Despite this, exchange-based statistics show that Russian crypto trading continues to decline. The crypto downward trend then leaves people wondering whether Lagarde’s proposition is factual and in touch with the actual crypto activities. According to Chainalysis, a blockchain-analytic firm, by March 18, the daily ruble-dominated crypto trading volume stood at $7.4 million, representing a 50 percent decline from past figures and a peak of $70 million on March 7. This is just a tiny fraction of the crypto trading volume globally. For instance, the total daily volume of Bitcoin averages between $20 and $40 billion.
Jake Chervinsky, the executive vice president and head of policy at blockchain association, maintains that crypto will never help Russia evade sanctions. Justifying his point, Chervinsky indicates that people need to understand how the crypto market works and the ways the Russian president is trying to mitigate the sanctions.
Currently, Russia faces frozen assets of Oligarchs and the central bank, a ban of Russian flights in the European Union’s space, the limitation of Russian banks to access the Society for Worldwide Interbank Financial Telecommunication (SWIFT), and more sanctions keep coming. Putin seems concerned about increasing Russia’s reserves into gold and Chinese Yuan (not cryptocurrency) and establishing trade partners with Asia and not onto the blockchain technology.
In a not-so-different data by Kaiko, a market data provider in the blockchain-based digital assets space, ruble-dominated Tether stablecoin activities have been down since the March 7 peak of about $38 million. Similarly, less than $5 million worth of RUB/USDT volume was recorded on March 22. Also noted was that only a few global crypto exchange platforms offer ruble-dominated crypto trading pairs.
Is Crypto Going to Save Russia from Sanctions?
In an interview with one of the major television networks, Roman Bieda, the head of fraud investigations at Coinfirm (a blockchain risk management platform), mentioned that crypto can be used to hide wealth and avoid sanctions. Refuting this argument, crypto experts exposed that Russia’s case is different because the country is currently experiencing less wiggle room due to the economic blow and its limited adoption of digital currencies.
On March 21st, The United Kingdom, the United States, European Union, and Canada announced sanctions targeting Russia’s central bank and national wealth fund. In particular, the US Treasury Department announced that it was limiting Russia’s President’s ability to use the country’s $630 billion in foreign reserves. The decision came shortly after the US and its allies cut off some Russian banks from SWIFT.
Following these decisions, Russia’s economy began experiencing more turbulence, and on Monday the ruble plunged to its all-time low. On the other hand, the central bank raised its interest rate to 20 percent while the stock exchange remained closed.
Ultimately, cryptocurrency alone will not allow Russia to skirt sanctions. Putin had a chance to build cryptocurrency infrastructure as part of his sanction-proof plan and missed it. There is no evidence to suggest that he will, going forward.
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