Crypto Is Not a Solution for the Global Sanctions Imposed on Russia
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Unless you’ve been living under a rock, you know that Russia invaded Ukraine a week ago. Sparking fears of a nuclear war, the Russians have been shelling their neighbor for a week now, drawing the ire of the European Union and the USA. Russia’s war united the world in sanctioning president Vladimir Putin and his closest allies. There have been severe financial measures taken against the oligarchs too, including severing Russia from the SWIFT system.
The oligarchs and the Russian government have turned to crypto as a solution, although this is just a speculation so far. Considering the increased Bitcoin trading volume and the price hike, it’s clear that something’s up in the crypto community. While the Russians are running toward crypto as a payment alternative, the West believes that it won’t save them.
Harsh Financial Sanctions
Russia’s president Putin is known as a guy that never backs down. He’s not afraid of sanctions and has even threatened with nuclear missiles indirectly. Since Ukraine is not in the European Union or NATO, the only way to try and stop Russia from obliterating its neighbor without starting a nuclear war is to cut the country’s finances altogether.
As many of you probably know, Russia is a country of insanely wealthy oligarchs. They have close ties to the Kremlin and Putin, so the West believes financial sanctions and limiting their movements is the way to deter the fearless president from taking things so far. Cutting Russia off the SWIFT system should help. Oligarchs wasted no time in looking for alternatives, buying crypto right away. While that hasn’t been made public, it is obviously the reason for Bitcoin’s latest price jump.
However, experts and analysts say that it’s not the solution to the financial sanctions imposed on Russia. While crypto has often been used as a way to evade sanctions and hide wealth, Russia’s case is different. Considering the country’s limited crypto adoption and the scale of the economic blow, crypto alone won’t save Putin and the oligarchs.
No Way to Replace Hundreds of Billions of Dollars
Nearly half of Russia’s international trade is done in dollars, and that can’t be replaced by crypto. Unlike North Korea or Iran, Russia has been deeply connected to the global financial system. Around 80% of its daily foreign exchange transactions are made in USD, and moving that kind of crypto is difficult.
After the US blocked Russia from accessing its $630 billion in foreign reserves, many thought crypto could help. But that’s simply too big of an amount in dollars to be replaced without raising any eyebrows. At the same time, the evasion of sanctions via crypto has also been blocked as many cryptocurrency exchanges have moved to flag Russian accounts.
So far, the world has not imposed sanctions on Russia’s two top exports – oil and gas. If that happens, then Moscow may emulate Tehran in using surplus power for crypto mining. However, sanctions on that level are unlikely at the moment. It seems that Putin and his oligarchs are in for hard times, as even crypto alone can’t erase what Russia did to Ukraine.
