Global sanctions on Russia caused Russian banks to lose access to SWIFT, a cooperative society providing financial transactions worldwide. As a result, investors speculate that Russia may switch to distributed ledger technologies, like cryptocurrencies, to conduct business. Investors should monitor the impact of the shift over to cryptocurrencies when considering online trading decisions. The effect might be that Bitcoin and other cryptocurrency stocks rally. The more extended sanctions that are imposed on SWIFT, the more necessary limitations of cryptocurrencies will become.
There are several reasons that the sanctions on Russia could lead to a bull market for cryptocurrencies including the decentralization of cryptocurrencies, the spike in conversion to crypto, and Russia’s tools to undermine sanctions. However, Russian crypto activity has historically paled in comparison to its use of traditional financial institutions. The impact of the sanctions is uncertain, but they will be far-reaching. It is essential for investors to monitor the effects of the sanctions on the cryptocurrency market.
SWIFT Access Ban on Russia
The implications of removing Russian banks from SWIFT are huge. The sanctions disconnect Russian banks from the international finance system, harming their ability to operate globally. In addition, the US imposed other economic penalties on Russia including restrictions that prevent the Russian Central Bank from using its international reserves to reduce the effects of the sanctions. However, the surge in crypto might allow Russia to subvert the sanctions.
Decentralization of Bitcoin
Cryptocurrencies do not have a central control system, allowing Russian clients to subvert global sanctions. Several crypto exchanges, which include Binance and Coinbase, have not banned Russian clients during this crisis. Binance accounts for over 40% of crypto trades in rubles. Both Binance and Coinbase asserted that they would restrict accounts targeted by sanctions but not impose a blanket ban. Since transactions can still occur, there could be a bull market in crypto, influencing online trading.
This situation means that no one can prevent cryptocurrencies from being used to help Russia evade sanctions. The exchanges could allow Russians to move money abroad. This scenario would undermine sanction efforts to stop Russia from war.
Russian’s Converting Savings to Cryptocurrencies
The Russian Ruble has tumbled against other major currencies due to the war. The Ruble is less than one cent to the US dollar. There has been a spike in Russians attempting to convert savings into cryptocurrencies. Trading volumes between the Ruble and cryptocurrencies reached 15.3 billion rubles on Monday. It was three times the volume from the previous week. Regulators like the European Commission have demonstrated concern that Russia might use crypto to evade sanctions.
Russia’s Tools to Undermine Sanctions
Russia has several tools at its disposal to avoid sanctions. The Russian government is developing its own central bank digital currency, which is essentially a digital ruble. It aims to use the digital ruble for online trading directly with other countries without turning it into a dollar to be accepted. The digital ruble would make Russia less dependent on the United States. Russia’s development of the digital ruble could cause a more significant spike in cryptocurrencies and likely result in a bull market.
Russia could also use hacking techniques to help Russians steal digital currencies. Ransomware would make up revenue that they have lost to sanctions. Cryptocurrency businesses in Russia frequently process significant transaction volume from illegal addresses. Entities affiliated with Russia account for 74% of global ransomware revenue. The use of these tools could also impact the cryptocurrency market.
New tools developed in Russia can help conceal the origins of transactions. This situation reduced the transparency of cryptocurrency transactions on the underlying blockchain. As a result, businesses could trade with Russian entities without it being revealed. Additionally, Russia could trade with other nations that are facing US sanctions, such as Iran, and develop government-backed digital currencies.
The Bottom Line
Global sanctions on Russia have led to increased concerns over Russia’s use of cryptocurrencies. Cryptocurrencies might allow Russia to find ways to evade its growing sanctions. The US and Europe banned Russia from SWIFT as part of their sanctions. In turn, Russia lost access to a global financial banking system. However, Russia could use cryptocurrencies to subvert these sanctions.
There are several reasons that Russia can potentially use cryptocurrencies to evade sanctions. In turn, the sanctions could lead to a bull market for cryptocurrencies. First, cryptocurrencies are decentralized, which means that companies like Binance and Coinbase can still conduct transactions with Russian clients. Second, there has been a spike in Russians converting their savings into cryptocurrencies, leading to a potential bull market. Third, Russia has employed several tools to undermine sanctions. These tools include using ransomware to steal digital currencies and hide transactions. For these reasons, there may be a bull market in cryptocurrencies due to the war. Investors should monitor the cryptocurrency market to make more informed online trading decisions.