The world witnessed with horror a full scale war in February 2022. Russia invaded Ukraine and major western nations declared economic sanctions on Russia.
Sanctions following the war
The United States have sanctioned Russia’s major large financial institutions, including Sberbank and VTB Bank. The daily transaction value by these banks is worth more than USD 46. Following the sanction, the banks are practically non-functional.
The UK has frozen assets of Russian banks including VTB. The country has also stopped Russian companies from raising funds here. British ban also targets Russian leadership’s closest circle.
European Union has decided to freeze European assets of Russian President Vladimir Putin and the foreign minister Sergei Levrov.
A consensus is building in the West to exclude Russia from the SWIFT payment system. Cross border payments are effected through this global SWIFT payment system which is essentially a messaging network service provider. More than 200 countries and over 11000 financial institutions are using the SWIFT payment system. Exclusion from SWIFT will isolate Russia from global financial market in a big way.
Cryptocurrencies in the present scenario
In such a situation of financial isolation, Russia may move towards cryptocurrencies. Banks ask for KYC from their clients. But in cryptocurrency exchanges and platforms it’s not required. Some experts feel that Russia can overcome the sanctions by fully converting to crypto. But there are limited options of converting crypto into fiat. Many governments are developing tools to track crypto transactions. This may be a real challenge for Russia to avoid sanctions and for Ukraine to receive relief measures through cryptocurrencies.