February 28, 2022
The Russian invasion of Ukraine has attracted widespread and sweeping sanctions from the West. In response to the economic sanctions being imposed by various countries on various Russian entities, the entities reportedly are looking to lessen their impacts by making deals with anyone eager to work with them.
Here’s what we know
- According to reports, the Biden administration enacted fresh sanctions on Russia over the conflict in Ukraine focused on banks and state-owned enterprises, particularly transfers of money through the traditional banking system. Germany and the UK too have announced sanctions while EU imposed sanctions aimed at “Kremlin interests”.
- As the US dollar is the world’s preferred reserve currency and the most commonly accepted fee for cross-border payments across the globe, it’s a powerful diplomatic tool for the U.S. The U.S. has used the sanctions tool in 2014 on Russia when they tried to invade Crimea.
- However, this time US officials believe that sanctions won’t hold the same power as last time due to cryptocurrencies. Usually while applying sanctions, a government makes a list of people and businesses that its citizens shouldn’t do business with. Anyone caught will be fined heavily. Well, more than the citizens, the real gatekeeper for any effective sanctions program are banks as they can block money transfers and transactions. But banks abide by ‘Know Your Customer’ protocol, which is missing in the crypto space.
- Russia has definitely thought through this and is ready to use crypto to minimize the impact of sanctions. Even Iran and North Korea have already used crypto to evade sanctions. Russia is already developing its own central bank digital currency (CBDC), a “digital ruble” and hacking techniques like ‘ransomware’ can aid the theft of digital currencies by Russia.
- In fact, ‘ransomware’ was even used by North Korea to steal cryptocurrencies to fund its nuclear program. Also, new tools developed by Russia can hide the original source of transactions, which would allow one to trade with Russian entities without being detected.
- “While the U.S. government can always do more, they’re not doing nothing. They are aware that this is an issue, and they are using multiple tools at their disposal to make sure that they have this area covered,” said Inca Digital CEO Adam Zarazinski, whose firm helps federal regulators track activity in crypto markets.
About the author
Based in Bengaluru, Priyanka Shetty is a freelance writer for Blockchain Asset Review.