Ukraine/Russia: Bitcoin, potential sanction breaker

Ukraine/Russia: Bitcoin, potential sanction breaker

free-running crypto enthusiasts praise the progressive financial freedom. But digital currencies could now be confiscated by Russia as weapons in the fight against the freedom of Ukraine.

crypto-assets could help Russia to continue trading with the West, even if the tightening of sanctions suffocates conventional payment channels.

It would hardly be a smooth switch. Bitcoin, for example, is a volatile and cumbersome transaction medium. The stock of cryptos is also tiny compared to important currencies such as the dollar. The entire crypto market has a market capitalization of $ 1.7 trillion, not much more than the Russian banking affected by sanctions, says the consulting company Elliptic.

sanction breakers would not have to use conformed platforms. Crypto exchanges such as Binance block the accounts of all Russian customers affected by sanctions, but keep against Ukrainian inquiries to freeze all Russian users.

Every company that enables prohibited transactions must expect serious consequences. Last September, the US Ministry of Finance imposed sanctions against Suex, a virtual currency exchange, because of its role in ransomware transactions. Last month, the FBI announced that it will set up a unit for blockchain analysis and confiscation of virtual assets.

law enforcement is supported by gaps in the secrecy of cryptocurrencies. Bitcoin users are, for example, linked to a public address. But there are services to improve anonymity that can help to disguise the origin of such transactions. In view of the Russian cyber expertise, it is expected that they are becoming increasingly sophisticated techniques.

cryptos could play a subordinate role in Russia's struggle with the West than as a replacement for correspondence banks. They finance themselves through cybercrime. According to the crypto analysis company Chainalysis, criminals in Russia stolen digital assets worth almost $ 400 million last year.

Russia could also expand Bitcoin mining operation by using its huge energy reserves. In this way, Iran has collected up to $ 1 billion, says Elliptic. Venezuela tried less successfully in 2018 to avoid sanctions with an oil -based cryptocurrency called Petro.

cryptocurrencies can play a positive role. Experience how they are used by people who fight for freedom in Ukraine and Myanmar. However, this role is increasingly overshadowed by sanction -breaking potential. Russia, China and Iran all work on their own sovereign digital currencies. The use of financial shock and reverence tactics against Russia will only accelerate these efforts.

collateral damage is likely. Expect a large-scale abuse to stop at the inclusion of crypto-assets by financial institutions. Cryptos began to move into the mainstream last year. This advance threatens to stall.

The Lex team is interested in hearing more from the readers. Please let us know in the comments below whether Bitcoin could be used in your opinion to avoid sanctions against Russia

Source: Financial Times