Can Russia Use Crypto To Bypass U.S. Sanctions? Canada’s Freedom Convoy Proves So

Speculation grew over whether crypto transactions could help Russia bypass restrictions placed on its financial system by the United States, after President Joe Biden on Thursday announced stricter sanctions against the country.

Biden announced restrictions against Russia’s two largest banks and several wealthy elites in the country. While the move effectively blocks them from the U.S. financial system, crypto could provide an alternative channel for transactions.

But he  held off on blocking Russia from the SWIFT network, a major cross-border payment system. Russians have not yet lost access to the global financial system. In his speech last night, Biden also did not address whether crypto could bypass sanctions.

A report from Bloomberg suggested blacklisted Russians could indeed use crypto to bypass economic sanctions by the United States. As it stands, governments have no means of blocking non-custodial crypto wallets.

Crypto use could potentially lessen the impact of recent sanctions.

Canada’s Freedom Convoy Crackdown

The Canadian government had recently invoked emergency powers to block more than 30 wallets associated with the trucker-led “Freedom Convoy.” But those wallets were all custodial, and government regulation was only able to extend as far as crypto-to-fiat exchanges.

Still, Canada’s move was widely criticized by the crypto community. It also saw crypto proponents urging users to switch to non-custodial wallets to avoid regulation.

In an official response to a Canadian government order, non-custodial wallet provider Nunchak said–

We do not collect any user identification information beyond email addresses. We also do no hold any keys. Therefore, we cannot “freeze” our user assets.

Unless the government is able to access a user’s wallet key, there is effectively no means to prevent transactions through crypto. The exchange to fiat currency, however, is another matter.

Russia a crypto powerhouse?

After bans on crypto mining in hubs China and Kazakhstan, traders see a lot of potential for mining in Russia.

A Russian bitcoin miner, who did not wish to be named, told Coingape-

The country has an abundance of electricity due to its large gas reserves. The relatively cold climate also reduces the need for cooling equipment.

Crypto adoption is also rapidly rising in Russia. The government estimates that Russians hold at least $200 billion worth of crypto, or 12% of the overall market. Recently, the Finance Ministry had submitted a bill that will recognize and regulate crypto as a tradable asset in the country. But the Central Bank has largely opposed this move.

About Author

A former Reuters correspondent with more than five years of experience covering global financial markets. Ambar intends to leverage this knowledge towards covering the rapidly expanding world of crypto and DeFi.