Everyone thinks Russia will turn to cryptocurrencies to get around the sanctions of United States and the European Union, especially on SWIFT. However, industry experts and analysts are now debunking this theory for several reasons. The Bitcoin Policy Institute has issued a memo outlining the main reasons why Russia will not switch to cryptocurrencies anytime soon.
He argues that Bitcoin and digital assets have become the monetary method of choice for raising money for Ukrainian struggles during the conflict. So far, the Ukrainian government and NGOs providing military support have raised $ 33,8 million, through nearly 30.000 cryptocurrency donations, as of March 1, 23.55 UTC according to Elliptic.
Russia will not hinge on cryptography
The Institute claims that Bitcoin (quotation BTC) is currently "too small" to replace the dollar or euro as a trading currency in Russia. Before the conflict, Russia was exporting around $ 400 billion a year, roughly half the market capitalization of BTC.
"Attempting to sell Russian assets in Bitcoin (to a limited set of buyers) would exaggerate its already high volatility and consequently make it difficult for Russia to predict or manage its commodity income."
He added that Russia's "substantial gold and yuan reserves" would make these activities a more viable backup. There is also the question of volume. The Bitcoin markets are currently trading $ 27 billion in daily volume. Russia conducts nearly $ 50 billion in forex transactions per day, according to RippleNet GM Asheesh Birla, so it would need to understand the entire BTC network and then some.
Another reason is that most major cryptocurrency exchanges must comply with US and global regulations and know-your-customer (KYC) procedures. As FXEmpire reported yesterday, many of them have already agreed to block sanctioned individuals and organizations.
Furthermore, cryptocurrency transactions are now easily traceable, as several blockchain tracking companies and entities have emerged in recent years.
Russia has also forged more and more ties with China, a country that has yet to condemn the invasion, so more trade is likely to be established before any switch to cryptocurrencies. Russia also has its own version of SWIFT which it has already initialized.
The senator calls for a ban
With all this evidence against Bitcoin being used to avoid sanctions, anti-crypto senators in the US are still shaking their angry fists and calling for more restrictions on the industry.
Commenting on a March 1 New York Times article claiming cryptocurrencies will be adopted by Russia, Senator Elizabeth Warren called for stricter regulations:
“Cryptocurrencies risk undermining sanctions against Russia, allowing Putin and his cronies to evade economic pain. US financial regulators must take this threat seriously and increase their control of digital assets ”.
It seems some are looking for any reason to crush the cryptocurrency industry even in the face of overwhelming evidence that dispels their misconception.
