I counter your counterattack! Russia may evade European and American economic sanctions with a secret weapon

After the war between Russia and Ukraine, when the United States and European countries launched sanctions against Russia, experts strongly urged countries to pay more attention-digital currency and cryptocurrencies may become the solution for Russia to evade sanctions in Europe and the United States.

Economic sanctions intensify, Russia kicked out of SWIFT
On February 24, after Russia started a full-scale war with Ukraine, the United States subsequently issued a joint statement with the European Commission (European Commission), France, Germany, Italy, Canada and the United Kingdom, jointly offering economic sanctions against Russia, Some large Russian banks have been expelled from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), an international payment system, in the hope of cracking down on Russia’s global trade channels and causing losses to the Russian economy.

“It’s naive to think Russia is not prepared”
However, there are various signs that Russia’s sanctions against Europe and the United States seem to be prepared this time. Experts have called for the possibility of using digital currencies in Russia’s transactions with other countries to bypass the penalties and influence of European and American countries.

“It would be naive to think Russia didn’t think about the consequences,” warned Michael Parker, a former U.S. federal prosecutor who is now an anti-money laundering and sanctions researcher at Ferrari & Associates.

Russia implements “de-dollarization”
The U.S. dollar is the strongest currency in the world and the most effective diplomatic tool for U.S. economic sanctions. Russia has experienced the severity of US sanctions since its annexation of Crimea in 2014, and it loses about 50 billion US dollars (about 1,402.5 billion Taiwan dollars) every year.

But since then, Russia has gradually reduced its reliance on the US dollar, and also envisaged that it may be kicked out of the international payment system SWIFT after the war with Ukraine in the future, so it began to develop its own SPFS system (System for Transfer of Financial Messages) to reduce Shock, and consider emerging currencies, digital currencies and cryptocurrencies, as a solution to avoid the US dollar and the traditional financial system, but also to trade with other countries.

The digital currency “digital ruble” has been launched
The Russian government is actively issuing their digital currency, the digital ruble. As early as October 2020, the Central Bank of Russia announced plans to issue digital rubles to resist U.S. economic sanctions, and in November 2021 last year, it launched the test of the digital platform as planned.

In October 2021, the U.S. Treasury Department also issued a warning that new payment methods for digital currencies may reduce the effectiveness of U.S. economic sanctions and bypass the traditional banking system for transactions; some experts have also issued repeated reminders recently that Russia may Among other countries sanctioned by the United States, looking for objects that can be traded in digital currencies, including China.

The New York Times reported that at the beginning of February this year, Chinese President Xi Jinping and Russia jointly issued a declaration that the two countries have “no limit to friendship and no restricted areas for cooperation”. In addition, China has also issued an official digital currency in recent years. In the future, the two countries will It is possible to take the transaction form of digital currency into consideration.

Cryptocurrency, Russia has unique resources to “mining”
In January this year, Russian President Vladimir Putin also expressed his appreciation for Russia’s “competitive advantage” in cryptocurrencies, because Russia has abundant oil, electricity and low temperature, providing a suitable environment for “mining” (Mining). In February, the Russian government reached an agreement with the central bank to formulate a draft to expand the supervision of bitcoin and other cryptocurrencies into the country.

In addition to the possibility of mining to supplement Russia’s income, Russia’s dark web is also very active. The largest black market on the dark web, Hydra, is based in Russia. The previous blockchain analysis platform Chainalysis found on February 14th. 74% of the world’s ransomware revenue went to Russia-related units, with an amount exceeding $400 million (about 11.2 billion Taiwan dollars).

There are precedents in other countries
In fact, Russia is not the first country to use digital currency or cryptocurrencies to evade international sanctions. Iran and North Korea have already used cryptocurrencies to increase their country’s income. London-based blockchain analysis company Elliptic estimated in May 2021 that after Iran started mining, the annual Bitcoin (Bitcoin) revenue could reach 1 billion US dollars (about 28 billion Taiwan dollars), successfully survived the US ban on oil, Banking and Shipping Industry Sanctions.

In February, a United Nations report also pointed out that North Korea is likely to continue to finance expensive missile development by stealing cryptocurrency.

Ukrainian Deputy Prime Minister and Minister of Digital Transformation Fedorov (Mykhailo Fedorov) thanked all parties for their cryptocurrency donations on Twitter, and announced the wallet address of Ukraine’s cryptocurrency in the tweet, welcoming more responses.

War and sanctions boost cryptocurrency circulation
War and international sanctions have made emerging currencies—especially cryptocurrencies, which have the characteristics of breaking through the state’s restrictions on the free transfer of assets and decentralization—become a more convenient and “safe-haven” asset in times of war. Especially in the Ukrainian War.

After Russia declared war on Ukraine, the ruble slumped to a record low, but the Russian cryptocurrency market rose instead of falling on February 28. Bitcoin rose 10.4% to about $41,000 (about 1.12 million Taiwan dollars). The exchange of Russian rubles for bitcoin in Ukrainian hryvnia (UAH) has reached a new high in months after Russia went to war with Ukraine on Feb. 24, according to cryptocurrency market data provider Kaiko.

The beneficiaries are not only Russia
And just two days after Russia invaded Ukraine, Ukraine received about $4 million worth of cryptocurrency donations for a military-supported organization alone, excluding other Ukrainian non-profit and government organizations inside.

The Censorship Resistant feature of cryptocurrencies means that funds donated by donors through cryptocurrencies will never be intercepted, and are more suitable for cross-border donations.

“It turns out that cryptocurrencies can also be a powerful way to fund wars,” said Tom Robinson, founder of London-based blockchain analytics firm Elliptic.

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