Bitcoin: Adoptions amidst Sanctions and geopolitical crisis?

• Russia’s invasion of Ukraine has sparked worldwide sanctions against Russia to convince it to stop its actions. 

• Concerns are raised regarding Russians utilising Bitcoin and other cryptocurrencies to evade these sanctions, but is it that easy?

• The use of Bitcoin and other cryptocurrencies have been increasing as the citizens seek to store their value amidst this geopolitical crisis. 

The war between Russia and Ukraine has led to worldwide sanctions against Russia to pressure and convince Russia to stop its actions. 

Among a chain of reactions, these economic penalties include cutting down Russian banks from the SWIFT system, freezing assets of Russian officials and bank institutions, and limiting the country’s access to transacting in foreign currencies. 

Russia-Ukraine and the Asset class:

This war has sparked an increased use of digital assets and conversion of Russian assets into the same. But there are concerns about whether Russia might use Bitcoin and cryptocurrencies to avoid the sanctions.  

Whereas several crypto entities have taken measures to act against Russia to the best they can. For instance, South Korean Exchanges like UpBit, Gopax, etc., have frozen the addresses and accounts of Russians. And the hardware wallet manufacturer Trezor recently cut down wallets to Russia. In Contrast, there were exchanges like Kraken and Coinbase who announced they wouldn’t bring down their services in the country. All in all, there have been mixed responses by them. 

The asset class is playing a significant role in donations to Ukraine, which has surpassed approximately $50 million in funds. And the concerns related to Russia using the asset class to evade sanctions might be valid, but the step won’t be as easy as it sounds. To move a considerable amount of money would witness various hurdles.

The activity of the Russian billionaires using the asset class can be tracked via the public ledger, as the transactions cannot be stopped. In addition, for them to evade sanctions at a scale, billions invested in BTC and others would make it impossible to make that level of purchases, hence liquidity issues. Furthermore, with anti-money laundering laws hovering around the exchanges, the transactions would be accessed for massive transactions. Currently, the exchanges are very cautious regarding this and won’t risk their company on sanctioned Russians. 

Russia holds around 12% of the crypto market cap globally. The asset class is facilitating the citizens witnessing financial scrutiny, as the access to traditional financial systems becomes a bit tough. The trading via crypto assets has increased post-Russia invading Ukraine. 

Although there might be obstacles, the Russians looking for a place to store their value might seek shelter in cryptocurrencies, especially Bitcoin. 

Recently the CoinShares CSO Meltem Demirors highlighted her views about the future of Bitcoin in an interview where she said that the current geopolitical tensions might help Bitcoin to drift away from the risk-on asset. And that the geopolitical crisis might facilitate BTC to emerge as a valuable asset. 

Crypto assets are emerging as a primary player amidst war situations, and it is to look forward to how the asset class would or would not help Russia. 

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Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.

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