An expert says crypto is "useless" for evading sanctions because of the transparency provided by public ledgers, coupled with the analytical skills of blockchain intelligence firms.
Russia "can't and won't" use cryptocurrencies to evade sanctions, a lawyer has claimed.
Jake Chervinsky, the Blockchain Association's head of policy, has said such concerns are "totally unfounded."
In a detailed Twitter thread, he said "crypto markets are too small, costly and transparent to be useful for the Russian economy," adding:
"Crypto markets are thin to start with and ruble trading pairs are rare. With Russia cut off from the world's crypto industry, they can't source nearly enough liquidity to matter."
Chervinsky went on to describe crypto as "useless" for sanctions evasion because of the transparency provided by public ledgers, coupled with the analytical skills of blockchain intelligence firms.
He pointed to a POLITICO report where officials from the U.S. Treasury said they weren't overly concerned about digital assets "undermining the effort to choke off the Kremlin's access to capital" — not least because laundering large sums of money through crypto is "expensive, time consuming and would likely be visible in the broader crypto market."
Chervinsky added that Putin's main strategy involves diversifying Russia's reserves into yuan and gold. And given how the country has now been stopped from using the SWIFT interbank messaging system, it may turn to a Chinese alternative in order to facilitate cross-border transfers.
Headaches for Russia
This analysis aligns with the views of other crypto experts — with Ari Redbord from the blockchain intelligence firm TRM Labs telling Al Jazeera:
"Russia cannot use crypto to replace the hundreds of billions of dollars that could be potentially blocked or frozen."
A potential bigger downside as a result of these economic sanctions could be an acceleration in the de-dollarization of the global economy — and it is possible that Russia could opt to embrace the digital yuan going forward.
Countries subject to punishing economic sanctions have used crypto as an evasion measure in the past — and according to the UN, North Korea has amassed billions of dollars by targeting crypto exchanges in hacks.
Although experts believe we're unlikely to see a repeat of this from the Kremlin, Joe Biden's administration is nonetheless urging crypto exchanges to ensure that they block any and all transactions that are attempted by individuals and organizations that are subject to sanctions.
Major exchanges — Binance, Coinbase and Kraken among them — have confirmed that they are complying with these requests.
