The birth of cryptocurrencies can be attributed to the distrust in the traditional banking system. Cryptocurrency makes up a substantial part of the Russian financial system. It is touted to be one of the modes of circumventing the sanctions imposed on Russia for its attack on Ukraine.
Washington is considering another avenue to choke the Russian financial system-Cryptocurrency sanctions reports foxbusiness.com. However, it will prove to be a difficult task since, by nature, digital currencies are private and designed to work across borders. It is beyond the central bank’s fiat currency financial system.
The U.S. Government, led by Joe Biden, is in the early stages of perfecting a system that will disrupt Russia’s crypto activities. The sanctions against Russia will have to be designed so that they do not harm the cryptocurrency sector as a whole.
Sanctioning Russian Cryptocurrency Is Difficult
There have been increasing calls to regulate the cryptocurrency sector. Today governments have the leverage to ask crypto exchanges and brokerages to block transactions in nations or with central bank -issued currencies, such as the ruble. According to a Russian Government estimate, there are 12 million cryptocurrency wallets in Russia, and Russian citizens have opened accounts worth 2 trillion rubles, or about $23.9 billion. Russia stands third for Bitcoin mining in the world, an energy-intensive and mathematically complex process by which Bitcoins are created.
The Russian Government has adopted an ambiguous policy towards cryptocurrencies and has neither approved the sector nor banned it from the financial framework. On the one hand, the Russian Central Bank is asking to ban cryptocurrencies from the economic framework; sections of the Russian Government want cryptocurrencies but in a regulated fashion.
President Putin had said in January that Russia has an advantage of surplus energy and a trained workforce. The Russian Finance Ministry has also prepared a framework of regulations that allows residents to invest in cryptocurrencies through licensed entities through cap the number of rubles they could invest.
Cryptocurrency-A Tool To Circumvent Sanctions
Cryptocurrencies can be used to circumvent the crippling sanctions imposed on Russia by the U.S. and the European nations. In addition, North Korea has used cryptocurrency to finance its nuclear and missile program. Iran has also allowed crypto mining to flourish and use it as a conduit to siphon off funds obtained from selling oil clandestinely .