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Russia highly unlikely to use Bitcoin to bypass sanctions.

Does Russia Plan To Evade International Sanctions?

Cryptocurrency specialists think Russia is unlikely to be able to effectively use Bitcoin and other alternative currencies to avoid heavy sanctions slapped on the country in reaction to its invasion of Ukraine.

On Saturday, Western allies moved to ban a number of Russian banks from accessing global payments network SWIFT, making it far more difficult for those banks to access global money and for Russian businesses to import and export goods. The rouble dropped by 30 per cent in reaction on Monday.

Also see: Cryptocurrency gains more adoption amid Russia — Ukraine crisis

Cryptocurrencies, which are decentralized and controlled by no single body, have been suggested as a mechanism for Russia to circumvent these sanctions, but, market analysts and experts have warned this would be implausible and could be easily blocked.

“Russia has been, over the last few months, gradually getting more comfortable with people having Bitcoin,” Tim Davies, head of research at crypto-focused fund Holon said.

“But might they utilize Bitcoin to make payments? It’s a hefty ask. I find it pretty hard to assume that Russia would suddenly switch currencies [to Bitcoin].”

Mr. Davies said Bitcoin’s high use cost and sluggish transaction times would limit any effort by Russia to deploy it as a viable alternative.

Crypto’s intrinsic openness and traceability would also serve as a crutch for any attempts by Russia to utilize it, thinks Caroline Malcolm, head of public policy and research at blockchain analysis firm Chainalysis.

“As with the traditional financial system, Russia can exploit cryptocurrencies to escape the sanctions that are being put in place in reaction to their invasion of Ukraine. And like in the traditional financial system, the bitcoin ecosystem may put mechanisms in place to recognize transactions from identified sanctioned entities,” she said.

Many large cryptocurrency exchanges globally have elaborate mechanisms in place to track and block transactions to help international authorities crackdown on criminals. These similar methods might be used to assist prevent Russian-linked cryptocurrency transactions.

See also: Is Bitcoin still a good investment in 2022?

So far, Chainalysis has not noticed any extraordinary crypto-related activity coming out of Russia, and Ms. Malcolm feels it would be impossible for any businesses or individuals designated by the sanctions to move big volumes of crypto presently.

Bitcoin is ultimately transforming the world’s financial system.

Cryptocurrency is being efficiently used by the Ukrainian government, which has so far raised approximately $US8 million ($11.3 million) in Bitcoin, Ethereum, and other cryptocurrencies after publishing a request on Twitter for aid.

Looking over the longer term, Mr. Davies believe the Ukraine crisis could serve to further legitimize use cases for cryptocurrency, pointing to the $11 million in aid sent to the Ukrainian government via crypto as an example of a positive use for the nascent asset class.

According to him, “If you can get the people in need access to capital rapidly through cryptocurrency … that really highlights the core purpose of crypto to ultimately transform the financial system as we know it.”

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