As Western powers began cutting off its access to the SWIFT interbank payment system, Russia could turn to cryptocurrency to bypass sanctions. This Monday Sergey Glazyev, a former Russian minister and advisor to President Putin, made this suggestion in an interview to Russian TV channel RBC.
Cryptocurrencies can become an alternative for settlements with Western countries, allowing Russia to continue international trade — but such a method can be used only if cryptocurrencies are legalized, he said.
The Russian government seemed ready to introduce such changes in the legislation earlier this month — against the central bank’s recommendation to ban crypto — even before the beginning on the war put the matter in the background.
Western analysts are aware of this eventuality. “We believe Washington is worried that Russia will use crypto to evade sanctions,” Cowen Washington Research Group analyst Jaret Seiberg said Friday, as reported by MarketWatch.
“If Russia is able to use crypto this way, then we believe political support in the US for crypto will fall and regulatory risk will rise.”
However, bypassing the sanctions in this way may not be as easy it seems. Since most global trade remains dollar-denominated, “paying in bitcoin requires a conversion to dollars, which provides a way to track activity,” Seiberg notes.
The analyst believes crypto could gain political support, should crypto exchanges help uphold the sanctions and the authorities use blockchains successfully to track evasions.
“The regulatory action could include a broad review of whether cryptocurrency triggers measures around anti-money laundering laws, the Bank Secrecy Act; as well as its impact on the Office of Foreign Assets Control and Know York Customer compliance,” notes MarketWatch.
The risk was identified in the US Department of the Treasury’s annual Sanctions Review released in October 2021 .
“Technological innovations such as digital currencies, alternative payment platforms, and new ways of hiding cross-border transactions all potentially reduce the efficacy of American sanctions,” said the report.
