Cryptocurrencies may be able to mitigate the effects of Western sanctions on Russia as well as its billionaires.
In response to Russia’s invasion of Ukraine, US President Joe Biden announced that he had authorised “tough sanctions.” These sanctions attempt to impede Russia’s capacity to transact in dollars and other major foreign currencies, and involve fines on five Russian banks with a combined asset value of $1 trillion.
However, in a government that is making strides to legalise cryptocurrencies and where the digital assets have already been widely held, such sanctions may be less effective.
Typically, countries utilise physical workarounds to dodge sanctions but digital assets such as cryptocurrency and decentralised exchanges might become the most efficient approach to avoid fines.
Sanctions implemented by the US and its allies on firms and persons could effectively shut them out of the West. Billionaires, some of which have already been targeted, may be able to avoid the penalty if they opt for cryptocurrency, which uses blockchain technology that keeps activities anonymous.
They may be able to buy products and services as well as trade in assets outside of Russia using virtual currencies, all while avoiding banks or institutions that are bound by sanctions and may track their transactions.
Situation with Cryptocurrencies
The legal position of cryptocurrencies in Russia is in flux, with the government pushing for their legalisation in a way to lure international investment and take domestic commerce out of the shadows, while the central bank claims they are a pyramid scheme and therefore should be banned.
Putin instructed them to seek a swift agreement last month, but top government officials have yet to agree on how to regulate cryptocurrency.
However, millions of Russians are already entrenched in the digital environment, with cryptocurrencies valued more than 2 trillion rubles , as per a recent government study.
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