Russia-Ukraine War Puts Crypto Into Test About What Good It Can Serve ⋆ ZyCrypto

As the United States launched an offensive against the use of crypto and fiat by Russia to evade financial sanctions for going into war with Ukraine, the same crypto and fiat are being spent in equal measure to fund war initiatives in Ukraine against Russia. The war has come with a risk of dividing the world into three groups – those supporting each of the countries and then the neutrals, but it now has a crypto twist in it. 

The United States Department of Justice has now announced that it will investigate and prosecute crypto exchanges and their operators found to be aiding anyone apart from the sanctioned Russian oligarchs to evade financial sanctions imposed on the country for going into war with Ukraine. 

A senior official from the department said on Friday that the task force launched last week to enforce the financial sanctions will also investigate lawyers, accountants, and other individuals found concealing and facilitating evasion or assisting sanctioned oligarchs and individuals to moving money in or out of Russia in violation of the sanctions.   

“Actors who stick their heads in the sand or blind themselves to moving dirty money may face money laundering charges for their role in concealing those proceeds.”

He said the task force would single out exchanges and legacy financial institutions that do not maintain adequate anti-money laundering policies and procedures thus allowing illicit transactions. But are these adequate in stopping it? Just like anti-money laundering initiatives implemented on fiat transaction and payment rails, most crypto anti-money laundering initiatives have proven to be of little effect. 

There are fears that crypto could be used to evade sanctions even though this remains to be seen. Analysts say many more Russians will start using cryptocurrencies as a result of the financial sanctions against the country. Russians together own a total of about $214 billion worth of digital assets in addition to the country being the world’s third largest in Bitcoin mining. Thus the country has a huge crypto user base. It has been contributing a huge crypto transactional volume without the war but that could change for good or worse as a result of the sanctions. 

It is not unclear whether crypto would aid evading sanctions in or out of the purview of censorship by a government. With some degree of anonymity and decentralization, it is unlikely the DOJ task force efforts could bear much success if at all Russians employ crypto in evading the sanctions, unless where an extravagant sum of money is transacted in a single transaction. Plus without a blanket ban on all transactions going in and coming out of Russia, not every transaction would be flagged or stopped. No crypto exchange has even so far implemented a blanket ban on transactions by all Russians although that could be a possibility as the Russia-Ukraine war intensifies. 

Already, some reports indicate that some Russians have used and are using cryptocurrencies to move money from some countries and then re-invest it in real estates and other hard assets in Dubai UAE, fearing that some countries could freeze it as a result of the sanctions. Dubai, like a few other places, has remained neutral in the contention between Russia and the West regarding Ukraine. A few other countries have also remained neutral. Therefore, crypto could be harder to use in evading sanctions in countries that have already imposed those sanctions. 

All the while, part of the over $55 million worth of crypto donations raised so far by and for Ukraine have been spent to openly fan the flames of a so-called good defensive war front by Ukraine against Russia. The Ukraine government has confirmed that it has spent it to buy vests and other military supplies – possibly even weapons. Just as questions have arisen on whether it is justified to use sanctions to punish Russians not involved in war decision-making, there will be questions on whether it is justified to make ordinary Ukraine citizens join the war regardless of the financial system employed.  It is imperative that crypto improves on or remains as it is as an alternative financial system – resistant from control, tampering, and censorship by any person, group, or central authority.  

Meanwhile, even as sanctions mounted and the list of people sanctioned grew, the Russian government is not backing down from the war yet. President Vladimir Putin said that the country would not compromise sovereignty for short economic gains and that it would overcome the sanctions.