As the Russian invasion of Ukraine progresses, the attacking country has been hit with economic penalties from all around the world in an attempt to pressure Russia into stopping the war.
The sanctions included removing Russian banks from the SWIFT system, blocking Russian leaders’ and banks’ assets, and restricting the country’s capacity to operate in foreign currencies, among other measures.
As the invasion persists, there has been a surge in the conversion of Russian cash into crypto assets, prompting speculation that Russian oligarchs may actually resort to Bitcoin (BTC) and other cryptocurrencies to hold the fort.
Nevertheless, the truth may not be as simple as the speculation claims. There are three key obstacles that must be addressed in order to shift huge amounts of money as needed.
The main issue is a scarcity of liquidity, at least on the levels needed for Russian authorities and billionaires to avoid sanctions. The networks would be unable to process such a massive amount of activity if billions of dollars were to be transferred into cryptocurrencies.
The NSC director of cybersecurity Carol House stated in a webinar on March 2nd that: “the scale that the Russian state would need to successfully circumvent all U.S. and partners’ financial sanctions would almost certainly render cryptocurrency as an ineffective primary tool for the state.”
Furthermore, Russian millionaires attempting to escape sanctions will have to depend on confidentiality, which is thought to be provided by cryptocurrency. This might not be fully accurate, though. When appropriate, law enforcement can track blockchain activity and cryptocurrency transactions.
Finally, because most crypto exchanges are wary of any possible criminal behavior, it would be challenging to use them for this purpose. These exchanges are susceptible to anti-money laundering regulations and are under intense monitoring from regulatory authorities overall, but especially in light of global events, so they will avoid making themselves vulnerable to exposure.
As a result, cryptocurrencies have been successfully utilized to facilitate the Ukrainian citizens and the defense of the country against Russia, with donations coming in from all over the world. These donations have topped $54 million, with more funds coming in.