Russian billionaires could circumvent the sanctions by using cryptocurrencies to buy goods and services abroad. People need to move fiat money through banking institutions that can track, freeze or block it, unlike what happens with cryptocurrencies.
Russia and its billionaires could use cryptocurrencies to circumvent the impact of the sanctions imposed by the United States and its allies. The Eurasian country faces those restrictions due to the military advances against Ukraine.
The US president, Joe Biden, reacted to the invasion of Ukraine by Russia by authorizing a series of economic sanctions against the latter. In that way, he seeks to limit their ability to do business in US dollars and other international currencies.
The United States imposed restrictions on five Russian banks with an accumulated capital of around USD 1 billion worth of assets. Some sanctions will also affect many Russian elites and their relatives.
The sanctions by the United States and its allies against Russian companies and individuals could close the door for them on the West. However, billionaires could circumvent those restrictions by using cryptocurrencies, which allow them to pay for goods and services outside of the country.
Mati Greenspan, CEO of Quantum Economics, said that two people or organizations could do business through Bitcoin. If wealthy people are concerned that the sanctions may cause their accounts to freeze, they can protect themselves with the pioneering cryptocurrency.
In October, the US Treasury Department warned that cryptocurrencies potentially reduce the effectiveness of US sanctions. They said that those assets allowed bad actors to hold and transfer funds outside the traditional financial system.
Cryptocurrencies as a Hedge against International Sanctions
An account holder needs to move fiat currencies through banking institutions that can track, freeze or block them. However, one person can send cryptocurrencies directly to another anonymously and without restrictions due to government sanctions.
In addition, cryptocurrency holders can set up a network of wallets with different addresses on various exchanges. That makes it too difficult to track transactions or link them to a particular individual. They can also choose crypto exchanges in jurisdictions that do not impose sanctions and do not require complying with regulations.
However, experts consider that Russian citizens cannot easily convert crypto assets into fiat currencies in the conflict with Ukraine. That may affect business transactions and operations in Russia, as not all companies and institutions accept cryptocurrencies.
The sanctions would affect the Russians who personally benefited from the policies of the Kremlin. US President Joe Biden stated that his government would keep pace with those designations against corrupt billionaires in the coming days.
The Russian citizens sanctioned by the United States and its allies have not yet revealed whether they are cryptocurrency holders. However, those who own crypto assets like Bitcoin will have an advantage over those who do not.
Decentralized cryptocurrencies play a relevant role in the economy, which is evident in the context of a war or any other crucial conflict. Since no government or state controls them, people can transfer money directly to others across borders.
By Alexander Salazar
