Russia has a tool at hand to dodge economic sanctions: cryptocurrencies

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The Economic sanctions they are a powerful tool for dealing with all kinds of conflicts. The United States and Europe know this well: they already applied them when Russia invaded Crimea in 2014. The cost for the latter was enormous – esteem than about 50,000 million dollars a year – but in Russia perhaps they learned that lesson.

The potential loophole from Russia lies in cryptocurrenciessay various experts in The New York Times. The virtual currency market has already been used by Iran and North Korea to mitigate the impact of Western sanctions, and those analysts believe that Russia has had time to prepare for those potential sanctions. Some in fact claim that “it would be naive to think that they have not exactly imagined that scenario.”

Cryptocurrencies as a way to blind the global financial system

Sanctions have served to punish actions like those of Russia, and their operation is totally based on the global financial system. It is the banks that analyze origins and destinations of economic movements.

They thus become “the eyes and ears” of the governments that impose these sanctions, but as they indicated in the newspaper, cryptocurrencies can leave them blind. Unlike what happens with fiat money and legal tender transfers, cryptocurrencies make such sanctions much more complicated.

Russia has invaded Ukraine on the ground.  The digital invasion had started many days ago

In Russia they have long preparing your own official cryptocurrency. They completed the prototype of this coin in December 2021, and two of the 12 banks operating in the country they already completed transactions in digital rubles between various clients.

The regulation of cryptocurrencies seems to be on its way in this country, though there are dissensions between the Bank of Russia – which I’d prefer ban mining and cryptocurrencies—and the Russian central bank, which is behind the push for the digital ruble.

That move is similar to that made by China, which has also been preparing its own digital yuan for months. the asian giant considers this development as the future of its economy, and has shown it with the support of that cryptocurrency even in part of the Beijing ATM network. Xi Jin Ping, Chinese President, already indicated the good state of relations with Russia, whose friendship “has no limits”.

In North Korea they have been taking advantage of cryptocurrencies for some time, and in fact at the beginning of February It indicated that the country was using these virtual currencies to finance its nuclear program.

Ransomware attacks whose ransoms are paid in cryptocurrencies could be a notable source of income for Russia, which in fact is allegedly responsible for several cyberattacks on Ukrainian institutions in the days before the military attack that began this morning.

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The drop in the value of cryptocurrencies in the last 24 hours has been remarkable. None is spared from the impact of the situation, although stablecoins such as Tether, USD Coin or Binance USD —linked to the US dollar— logically are not so affected.

These attacks have caused, yes, a notable drop in the value of cryptocurrencies. Virtually all of them are in the red right now, and both bitcoin and ETH have lost between 10 and 14% of their value in the last 24 hours. That trend has spread to the rest of the tokens, whose value has similarly fallen.

Russia is in fact one of the main supports of cryptocurrency mining. The latest data indicates that it controls 12% of all cryptocurrencies, which has seemed to be a compelling reason —together perhaps with the current circumstances— to avoid prohibiting this activity, something that they did do in China, for example.

Official support for cryptocurrencies has been spreading to other countries in recent months, and in fact Mykhailo Fedorov, Deputy Prime Minister of Ukraine, indicated a week ago the country legalized cryptocurrencies so that its citizens “can protect their assets against possible abuse or fraud”.

Image | Sue Ogrocki/AP

The Economic sanctions they are a powerful tool for dealing with all kinds of conflicts. The United States and Europe…

The Economic sanctions they are a powerful tool for dealing with all kinds of conflicts. The United States and Europe…

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