Could Russia use cryptocurrencies to circumvent sanctions?
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Several crazy sessions for cryptos have taken place over the past few days as traders continue to size up Russia's invasion of Ukraine. There has also been fierce debate whether Bitcoin (BTC-USD) and related currencies could be used to evade Western sanctions, as well as crypto's correlation to risk assets. At the time of writing, Bitcoin (BTC-USD) is up 14% to $43,590, after falling under the $35,000-level just days ago.
Quote: "Bitcoin and cryptocurrencies are arguably having their watershed moment against backdrop of global uncertainty and tension related to the Russia-Ukraine crisis," said Vijay Ayyar, VP of Corporate Development at crypto exchange Luno. "Crypto is decoupling from traditional markets and can be clearly seen in the performance. It's also being donated to the Ukrainian army, proving that crypto is fundamentally a technology that cannot be ignored."
"Unless the Russian companies are on the sanctions list, we can't see anything that would keep a U.S.-based company from paying a Russian company through crypto to just transact," added Rance Mashek, president and founder of trading platform iVest+. The Biden administration has also reportedly asked exchanges to ensure that Russian individuals and businesses aren't using crypto to avoid U.S. sanctions, though a similar request made by Ukraine was not honored by major players like Coinbase (NASDAQ:COIN). The EU is meanwhile trying to move quickly to approve cryptocurrency regulation that would give a framework for the industry at the governmental level.
Outlook: Even if Russia would turn to cryptocurrency to evade sanctions, it wouldn't be able to be used on the scale needed to circumvent the penalties. "I think the issue is a couple of things... the liquidity just simply isn't there," explained Ari Redbord, head of legal and government affairs at TRM Labs. "Russia needs a lot more access to funds in order to replace what is being lost here in terms of sanctions, and also fund what is becoming a more and more costly war. In this day and age, you still cannot fund a war or buy weapons - for the most part - with cryptocurrency. So Russia will look to crypto exchanges in order to do that, but the overwhelming amount of liquidity is at the large cryptocurrency exchanges that have robust compliance controls in place."