Can Russia bypass EU sanctions through cryptocurrency?
Russia has apparently turned to cryptocurrency since the West decided to “punish” the nation for its invasion of Ukraine. A list of sanctions had been imposed on the country by the US and EU which worked to essentially cut Russia off from world traders. However, with the rise in popularity of crypto, it has provided a possible way for the country to avoid these sanctions that would have otherwise stuck when fiat currencies were the only form of payment.
Why Russia Could Turn to Cryptocurrency
One thing that has drawn investors to cryptocurrencies like Bitcoin is the fact that they are decentralized. A decentralized currency is not controlled by one entity. Therefore, sanctions do not apply to them, regardless of how severe they are. This has made it attractive to those who want to avoid detection by authorities, or in this case, countries trying to circumvent sanctions.
Lately, Russia has warmed to crypto as a way to promote trade around the sanctions. The most prominent of these has been the sanctions against Russian gas purchases, creating the possibility of the country accepting crypto as a form of payment for their oil and gas. By using a cryptocurrency like Bitcoin, Vladimir Putin can completely avoid these sanctions and the established banking system.
Back in September, the US Treasury Department’s Assistant Secretary for Terrorist Financing and Financial Crimes, Elizabeth Rosenberg, told lawmakers that it was possible for the Kremlin to effectively avoid sanctions imposed on it. Senator Elizabeth Warren also echoed this concern, pointing to the fact that there was already widespread use by North Korea to evade sanctions, and it was just as easy for Russia to do the same.
Market cap at $984 billion | Source: Crypto Total Market Cap on TradingView.com
Still an important player
Although there are currently sanctions against Russia, the EU is still dependent on the supply of oil and gas from the Kremlin. Companies in Europe, although they have shown support for Ukraine in the war, quietly continue to acquire products from Russia.
Given this, it is not a stretch to say that Russia would have an abundance of customers if it were to switch to crypto payments for its oil and gas. It is already an established player in the oil and gas industry and companies will not find it easy to have to change suppliers. So it would make sense to go through the relatively minor inconvenience of converting fiat to crypto to pay Russia than spend millions of dollars switching international suppliers.
Russia has already softened its stance on cryptocurrencies since the start of the war. In September, it was reported that the government had reached an agreement with the central bank on a rule that would allow citizens to make cross-border payments using crypto. Trade Minister Denis Manturov said back in May that the country would legalize payment of digital assets “sooner or later”.
Featured image from PYMNTS, chart from TradingView.com
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