Russia seems to be unscathed by the US sanctions, thanks to the boom of cryptocurrency
In 2014 when Russia invaded Crimea, the United States imposed strict sanctions against Kremlin. It barred Americans from doing business with Russian banks, oil and gas developers, and other companies. Back then, the impact of the embargo was so surreal and cost US$50 billion for Russia. Almost eight years later, Russia seems to be unscathed by the new US sanctions it is facing today, thanks to the boom of cryptocurrency.
Although digital tokens existed even back in the time, the usage was comparatively less. But since the 2014 US crackdown on the Russian economy, the global cryptocurrency market has grown drastically. The world leaders are left baffled after Russia invaded Ukraine and is inching to take over the country. It has created widespread fear and triggered sweeping sanctions from the west. While Europe has unleashed strict sanctions against the Kremlin, the US government has gone against Russia’s state-owned enterprises where money is transferred through traditional mediums. On the other hand, Germany and the UK have also announced restrictions targeting the Russian economy. However, Russia seems to be relaxed about the moves despite its growing severity. While experts examined the reason behind it, they found that Russia might have planned to use cryptocurrency, especially, the central bank digital currency it has worked on, to combat restrictions.
Some analysts have warned that Vladimir Putin, the President of Russia, could easily use cryptocurrency as a substitute to counter Western sanctions. But the drama won’t end there. In the past year, the US and its politicians have come in support of digital tokens. Over time, the citizens have also started accepting it as a medium of value storage and exchange. But the usage of cryptocurrency to evade sanctions could trigger a new row of scrutiny, which has the potential to make US politicians go against the decentralized medium.
However, if Russia is banned from SWIFT global interbank payments system, it might have a hard time managing with cryptocurrency also. Since most global trade is still dollar-denominated, it could be challenging for Russia to use digital tokens to counter the attack. Unfortunately, Kremlin could still make the maximum out of the central bank digital currency it is working on. Currently, it is a now or never game for digital tokens. If cryptocurrency exchanges help US authorities to withhold the sanctions against Kremlin, then it will boost the viability of the decentralized medium. But if it fails to do so and cryptocurrency in Russia intensifies, the Western nations will rethink their decisions on digital tokens.
Besides, a week ago, the Russian finance ministry said that it had submitted draft legislation regulating cryptocurrency in the country. It includes identifying the user and imposing a cap on investment.
The Loophole in US Sanction: Cryptocurrency
The Western countries have been using ‘Sanctions’ as a tool to jeopardize Russia’s economy for a long time. Since the US dollar is the reserve currency, it is most widely sued as the medium of exchange and cross-border payments across the globe. But with cryptocurrency gaining ground in the digital ecosystem, the US dollar is losing its dominance.
The recent Russian sanction was also imposed with a motto to stagnate Kremlin from accessing the global financial system, especially banks and other central authorities from providing enforcement. But to evade the embargo, Russia might use cryptocurrency-related tools. They will start embracing digital tokens to conduct trade without using the US dollar. On the other hand, Russia is also strengthening its hold on the central bank digital currency (CBDC). It will help Kremlin use it with trade partners without having to cover the money to US dollars. Meanwhile, cryptocurrency mining in Russia has also increased despite the growing regulations and the threat of to ban. Recently, cryptocurrency hacks from Russia have also increased drastically. The West is wondering if Kremlin is using hacking techniques to recoup revenue lost to sanctions.
The Legality of Cryptocurrency in Russia
Russia is currently gambling the usage of cryptocurrency as it hasn’t come out with a master plan. On one hand, they are benefitting from digital tokens as the US imposes strict sanctions against the country. It will also attract foreign investment and bring domestic trading out of the shadows. On the other hand, Russia is planning to ban or at least regulate cryptocurrency.
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