Russia’s richest men have been recently sanctioned by various countries and organizations, including the new ones coming from the European Union- according to which, they are connected politically and financially to the Putin government.
Earlier, Russian President Vladimir Putin said that crypto mining is one of Russia’s competitive advantages over many other countries. Therefore, the nation could seek its ‘competitive advantages’ to escape the newly imposed economic and financial sanctions.
Cryptocurrencies have become the definition of Gen-Z assets. But the unregulated crypto market might also be a way for the Russians to capitalize on their crypto mining sector.
How would it work?
In Bitcoin (BTC), mining refers to an energy-intensive process wherein computers verify new bitcoin transactions and put them on a virtual ledger or record sheet called Blockchain, thus generating new bitcoins as a reward for the done work.
Now, after the full-scale invasion of Ukraine by Russia, countries worldwide have put severe sanctions on the Russian Federation, creating wreckage for the country’s economy. The Russian banks have also been expelled from Swift- the primary global payments messaging system banks use for making cross-border money transfers.
In these challenging times, Russia and its banks could be looking at cryptocurrencies more closely, which would act as an alternative medium of international exchange to the dollar. Cryptocurrencies could then also bypass the global banking system, which is a key to enforcing sanctions as a listening post for financial transactions worldwide by offering alternative ways to make irreversible cross-border transactions.
Blockchain transparency and the escape route
Crypto, which is usually flagged as a money-laundering tool, has yet been favored by some crypto experts. They argue that the transparent nature of the blockchains would make it difficult for the sanctioned people to use the crypto market to escape the sanctions.
However, some nation-states have already used Bitcoin to escape. Iran, one of the most sanctioned nations by the United States, with its fossil fuel reserves, has been converting its excess energy into cash by getting Bitcoins from the Iran-based Bitcoin miners. This could also be applicable in the Russian economy.