Experts reject concerns Russia will use crypto to bypass sanctions: ‘Totally unfounded’
Blockchain Association’s Jake Chervinsky believes politicians should not be worried that Russia may use crypto to get around economic sanctions because it is not feasible at the scale required.
Experts on crypto policy argue that concerns expressed by high profile politicians about Russia evading economic sanctions using cryptocurrency are “totally unfounded.”
They say the crypto market is not nearly large enough nor deep enough to support the volume that Russia needs and that the country’s digital asset infrastructure is minimal.
Former U.S. Secretary of State Hillary Clinton and the current President of the European Central Bank Christine Lagarde are among the high profile figures concerned that cryptocurrency could provide the means for Russia to bypass severe financial sanctions imposed for its invasion of Ukraine.
The country has been mostly cut off from the SWIFT cross border transaction system and businesses in America and other western countries are prohibited from doing business or transacting with Russian banks and the national wealth fund.
The Head of Policy at crypto policy promoter the Blockchain Association in the U.S. Jake Chervinsky posted a lengthy Twitter thread on Mar. 2 explaining how “Russia can’t and won’t use crypto to evade sanctions.”
Chervinsky stated three reasons it is unlikely that Russia will use crypto to skirt U.S. sanctions. The first is that the sanctions are not limited to USD, and it is now illegal for any US business or citizen to transact at all with Russia. He said, “It doesn’t matter if they use dollars, gold, sea shells, or Bitcoin.”
The second reason is that financial necessities of a nation like Russia far exceed the current capabilities of crypto markets which Chervinsky called “too small, costly, & transparent to be useful for the Russian economy.” In other words even if Russia could access enough liquidity it still couldn’t hide its transactions in such a market.
Finally the country has spent years trying to “sanctions proof” itself but has failed to build any meaningful crypto infrastructure or even finalize crypto regulations. Chervinsky says that crypto simply does not appear to be part of Russia’s plans to mitigate the effects of sanctions.
“The reality is Putin’s spent years trying to sanctions-proof Russia & crypto isn’t part of his plan. His strategy included diversifying Russia’s reserves into yuan & gold (not crypto), shifting trade to Asia (not onto blockchains), bringing manufacturing onshore, etc.”
However, the head of fraud investigations at blockchain research platform Coinfirm, Roman Bieda, told Al Jazeera on Mar. 1 that it was possible in general to use crypto to “evade sanctions and hide wealth” as has been done by North Korea, Venezuela, and Iran.
But other experts told the outlet that said Russia’s case is different because of the scale of sanctions, its sluggish rate of crypto adoption and lack of depth in markets.
Ari Redbord, Head of Legal and Government Affairs at crypto crime investigator TRM Labs said the transparency of blockchain was a natural deterrent to sanction evasion in this case.