For having attacked Ukraine, Russia is targeted by a whole battery of economic sanctions, coming from the United States, the European Union and several other nations. But cryptocurrencies could allow the country to alleviate their consequences.
Freezing Vladimir Putin’s assets and his Minister of Foreign Affairs, Sergey Lavrov, in Europe, heavy ripostes against Russian banksexclusion of Russia and certain large companies international financial markets, restriction of the export of technological products intended for the defense and aeronautics sectors…
Day by day, the list of sanctions against Russia grows longer. Since the beginning of the invasion of Ukraine, the United States and the Europeans have tried to confront and impose as many restrictions as possible on the Russian regime – without going so far as to take the decision toremove Russia from the Swift international banking network.
But for the moment, all these sanctions, which could become even tougher in the days to come, have not been enough to make the Russian army retreat, or even to slow down the attacks. Anatoly Antonov, the Russian ambassador to the USA, had also assured that they would not work. In a Facebook post posted on February 23the day before the start of the Ukrainian invasion, he explained that ” punishments [contre la Russie] can’t solve anything “, and that he did not think ” that only one person in Washington genuinely expects Russia to change its foreign policy under the threat of sanctions ».
Besides the fact that Russia is accustomed to reprisals (the country has suffered them since 2014 and the annexation of Crimea), if the government is not panicking about restrictions, it is because it has a strategy to avoid their consequences — including cryptocurrencies are part of.
Cryptocurrencies to avoid European sanctions
It was Alexander Shokhin, the president of the lobbying group “Russian Union of Industrialists and Entrepreneurs” who the first mentioned the idea in June 2021. During a meeting on the consequences of the new sanctions imposed on Russia after the poisoning of opponent Alexei NavalnyAlexander Shokhin suggested using bitcoin and other similar currencies as a way to escape Western maneuvering. And since the beginning of the invasion in Ukraine, the idea is raised again.
The track is not new: in 2019, Iranian Internet users organized a call for crypto-currency donations after being hit by violent floods – while the country is under severe economic measures. And in 2020, the Venezuelan president Nicolás Maduro described cryptocurrencies as a means of circumventing the restrictions imposed on his country.
Indeed, economic sanctions are imposed by States, but they are in most cases executed by banks and banking institutions. Banks must verify transactionsand have a duty to block them and notify the authorities if the exchanges seem suspicious to them, or if they involve banned groups, companies or countries.
By operating outside of the traditional banking system, cryptocurrencies allow wallet-minted entities to continue transacting. There is no need to go through banking intermediaries, as for traditional transactions: everything is done on the blockchain. Going through digital currencies would therefore allow Russian institutions to avoid the majority of the sanctions that concern them.
Blockchain exchanges are public, but hard to track
In addition to escaping the control of the banks, they have another advantage. People in possession of cryptocurrencies can indeed own many digital wallets, and these wallets hide the identity of the owners quite well. This means that, although transactions on the blockchain are public, it is easy to hide your identity through several accounts – you can certainly end up finding someone, but it is difficult for the authorities to track the transactions, and to link them to a particular individual or institution.
It is also possible to call on crypto exchanges registered in countries that do not impose sanctions, as Bloomberg notes; or to use “private” currencies, such as Monero, which ensures that transactions are untraceable.
Above all, Russia has tools to allow its transactions on the blockchain to be highly untraceable, such as explains the New York Times. The newspaper indicates that such tools would have been used by the Iranian and North Korean regimes, two states targeted by severe economic measures, in order to circumvent them. North Korea would thus have used it to finance nuclear research programs.
The digital ruble is in the test phase
The only real problem that cryptocurrency users would encounter would be when converting to fiat currencies i.e. coins and bills. Many crypto exchanges switch, at one time or another, to the dollar — gold, as soon as the American currency is used, US laws and sanctions apply. It could therefore be very difficult for Russian players to convert their bitcoin to ruble. But, precisely, Russia should very soon acquire a tool that would eliminate the need to go through exchange platforms: the digital ruble.
The digital ruble is a digital currency project: it is therefore not a cryptocurrency. The “e-roubles” are issued by the Russian central bank, which makes it a centralized project. The site of the Central Bank of Russia is clear on this: the bank is responsible for the digital rubles; and they are not related to cryptocurrencies “. The site is however much less precise on the technical specificities of the e-rouble: it is only indicated that they will be deployed “ through digital technologies ».
Nevertheless, it seems that the Russian digital currency project is quite similar to that of the Chinese e-yuan, which was first deployed during the Beijing Olympics. It can be summed up simplistically that using digital rubles would be similar to using a credit card, in the sense that there would be no need for currency units. tangible in order to make purchases. In the end, this would not change much for users: the real revolution would take place at the level of the transactions themselves: there would no longer be any need to go through banks or intermediaries, such as Visa or MasterCard.
Cryptocurrencies are not yet regulated
And it is precisely this aspect that could allow Russians to convert their cryptocurrencies into rubles. The Russian central bank announced February 16, 2022 that the first tests with the digital ruble were going to begin.
The conditions therefore seem ready for cryptocurrencies to allow the Russian authorities not to worry too much about European sanctions. Except that there remains a major obstacle: they are not yet regulated in Russia. The situation is even more delicate than that: Elvira Nabiullina, the president of the Russian central bank, is fiercely opposed to it, which she would like to see banned purely and simply.
On his side, the Minister of Finance hopes to pass a new law by the end of the year to better regulate cryptos which would give them legal status. For now, no one can say who, the finance minister or the central bank president, will have the final say on the matter — or how it will impact how Russia deals with sanctions.