Cryptocurrencies could have allowed Russian billionaires to mitigate the effects of Western sanctions. This sanction may not have such a major impact on a country that has long taken steps to legalize cryptocurrencies and where many already own digital assets.
Russian billionaires can circumvent sanctions with the help of cryptocurrencies
“Neither dictators nor human rights activists will ever face any censorship on the BTC network.”
Matthew Siegel, Head of Digital Asset Research VanEck.
Billionaires are thus free to use digital currency to buy goods and services, as well as to invest in assets outside Russia, while bypassing the bank or organization that is under sanctions.
If two people or organizations want to trade together and cannot do so through banks, they can turn to BTC.
If a wealthy person fears the possibility of freezing their accounts due to sanctions, he can simply store his wealth in cryptocurrencies, which will protect him from similar actions.
Mati Greenspan, founder and CEO of financial advisory firm Quantum Economics
Unlike fiat currencies, which must be transferred through third-party institutions that can track and freeze funds, cryptocurrencies can be sent directly from one person to another, regardless of any government sanctions or other restrictions.
Crypto holders can also create a network of wallets with different addresses on multiple exchanges, which makes it extremely difficult to track any activity and even more difficult to link transactions to a specific person. In addition, they may choose an exchange that is not located in the territory of the sanctioning countries and is therefore not obliged to comply with these rules.
People bypassing a bank or even a centralized exchange that abide by sanctions will have to convince all the service they trade with to accept digital payment, which can be difficult.
“Of course, the government still has a way to get crypto assets held on centralized exchanges,” said David Taweel, president of croup investment company ProChain Capital. He mentioned the recent freezing of crypto accounts by the Canadian government, which were owned by truckers who received funds to support the blockade of border crossings between the US and Canada and the protest in Ottawa – Freedom Conwoy.
According to Brett Harrison, president of the American Exchange FTX, the exchange has access to certain technologies that allow them to monitor and verify wallets registered in sanctioned countries. It will also be difficult for people to circumvent control when converting cryptocurrencies to fiat currencies through centralized exchanges, so spending such funds will be much more difficult.
What can be prevented is a capital outflow from a certain exchange, where the relevant sanctions are properly enforced, Harrison said.
It sounds very simple and from the mouth of the maximalists the choice is quite complicated. As in the case of North Korea (they are also cut off from SWIFT), which has been shown to cheerfully continue to finance the weapons program with cryptocurrencies.