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Following the Invasion of Ukraine, Russia may use Bitcoin to Circumvent Western Sanctions

Cryptocurrencies could mitigate the impact of US sanctions by allowing countries to make transactions outside of the banking system.

As cryptocurrencies are rapidly being perceived as a hedge against fiat-induced economic concerns, it is difficult to predict how Russia would regard virtual assets throughout its present NATO tensions.

On February 24, Russian forces stepped into Ukrainian territory for the first time in one of the most brazen invasion efforts in history, putting an end to years of uncertainty about an invasion and unleashing a slew of sanctions against Russia from NATO and its partners.

After Russia refused warnings to retreat on its attempts to undermine Ukraine’s independence and territorial integrity, the US President issued an executive order “Blocking Property of Certain Persons and Prohibiting Certain Transactions” on February 21, paving the way with the first sanctions imposed on Russia.

This came as a result of the recognition of Donetsk and Luhansk People’s Republics (DNR and LNR) as “independent” states by Putin who wanted to put troops within the territories. On early Thursday, the leaders of the European Union pledged to “agree on the harshest package of sanctions we have ever implemented” so that the Russian President would stay his hand. 

President Putin, on the other hand, appears unfazed, promising to press on with his annexation attempts. Some are attributing Russia’s audacity to its recent forays into cryptocurrencies, particularly Bitcoin (BTC), which could serve as a buffer against sanctions.

To dodge sanctions, Russian corporations have a variety of cryptocurrency instruments at their disposal, along with ransomware and digital ruble, per the New York Times. Moreover, the report emphasized that “when the United States barred Americans from doing business with Russian banks, oil and gas developers, and other companies in 2014, after the country’s invasion of Crimea, the hit to Russia’s economy was swift and immense. Economists estimated that sanctions imposed by Western nations cost Russia $50 billion a year. Since then, the global market for cryptocurrencies and other digital assets has ballooned. That’s bad news for enforcers of sanctions, and good news for Russia.”

In contrast to other countries, Russia has taken a positive approach to the crypto industry. This stance was surely taken with a grain of salt given the recent developments in Ukraine. President Putin’s recent initiative to hasten the construction of legislative and financial infrastructure for Bitcoin (BTC) has been regarded as a foreshadowing of western sanctions in response to the Ukraine invasion which has been threatened for months.

Bitcoin (BTC) has the potential to be among the most critical problems in the Russian-NATO-US stalemate per the Orange Pill Bitcoin podcast co-host, Stacy Herbert. She has warned Bitcoin (BTC) hodlers by saying that “sanctions will inevitably be met with bitcoin; facts are neither positive nor negative.”

Russia currently holds the status of the world’s third-biggest Bitcoin (BTC) mining. Russian citizens own 12% of the total value of cryptocurrencies, equivalent to $214 billion, as per Bloomberg.

Considering that cryptocurrencies are decentralized, experts believe Russia will be able to navigate the sanctions imposed on it with such a large amount of cryptocurrencies within its grasp. Other countries, despite being subjected to sanctions from the United States such as Iran and China, may potentially back Russia.

Moreover, cryptocurrencies have the potential to mitigate the impact of US sanctions by allowing countries to process transactions outside of the international banking system according to the Centre for a New American Security.

These events have certainly caused FUD throughout the market. Hence, you should be careful with your investments if you are willing to buy the dip.

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