Facing global sanctions, do cryptocurrencies present a way out for Russia
As the war in Ukraine rages on, an interesting phenomenon that has emerged is the role cryptocurrencies can play during a global crisis of this scale, and the ways in which it can be utilized by both sides to either circumvent financial measures against them or rally international economic support.
Russia to foray into crypto?
Ever since many major nations imposed economic sanctions against Russia and its top leaders in response to its attack on Ukraine, experts have pointed out the possibility of Russia using the crypto route to carry out transactions instead, especially after moves were made to remove it from the global SWIFT system.
In preparation for the same, Ukraine’s Ministry of Digital Transformation has sent letters to 8 crypto exchanges, including Coinbase, Binance, Huobi, KuCoin, Bybit, Gate.io, Whitebit, and Ukraine-based Kuna to stop offering their services to Russian users in a bid to restrict the country from using cryptocurrencies to circumvent sanctions. This was promptly refused by leading exchanges such as Binance, Kraken and Coinbase have already denied these requests, citing issues of discrimination and financial warfare.
Circumventing sanctions via cryptos ‘impossible’
Nevertheless, it turns out circumventing sanctions through digital currencies might not be as easy as previously thought, according to RippleNet’s general manager Asheesh Birla. Taking to Twitter, the executive noted that the first issue was with the accurate tracking of transactions that is possible through blockchain technology. Furthermore, he noted that there “simply isn’t enough global liquidity to support Russia’s needs.”
Birla noted that Russia conducts nearly $50 billion in foreign exchange transactions in a day, while the Bitcoin network’s daily volume sits somewhere around $20-50 billion a day. This means that Russia would require all of BTC’s power and more to sustain its daily needs, even as only $200,000 worth of Russian rubles can be sent at a time through BTC on Binance. This is comparatively lower than the $3.7 million that can be sent through BTC/USD and $2.9 million through BTC/EUR on Bitstamp, said Birla, further adding,
“Even if you were sending ~$200K every minute & assuming the BTC/RUB market was resilient enough to immediately replenish the liquidity (very doubtful), you’re nowhere near $50B / day. Also, the total average daily volume over the last month for BTC/RUB has been just ~$11M.”
Regardless of this, the U.S is also stepping up to restrict the use of digital assets by sanctioned entities, as Bloomberg reported earlier today that The White House’s National Security Council and the Treasury Department are working with exchange operators such as FTX, Coinbase, and Binance to take a targeted approach focused only on those who have been sanctioned.
Following this, both Coinbase and Binance have started to take steps to identify crypto wallets of sanctioned individuals and block payment to and from such accounts.