The European Union and the United States are considering how to prevent Russia from adopting cryptocurrency to avoid financial sanctions. On Wednesday, French Finance Minister Bruno Le Maire stated that the EU’s 27 member states were already taking these steps.
“We are taking measures, in particular on cryptocurrencies or crypto assets which should not be used to circumvent the financial sanctions decided upon by the 27 EU countries.”
According to Treasury Secretary Janet Yellen, the US is also keeping an eye on Russia’s potential use of cryptocurrency to circumvent the sanctions. She was replying to a letter from three US senators — Elizabeth Warren, Sherrod Brown, and Mark Warner — who had written to her about the risk of Russia using cryptocurrency to avoid sanctions.
“Given the need to ensure the efficacy and integrity of our sanctions program against Russia and other adversaries, we are seeking information on the steps Treasury is taking to enforce sanctions compliance by the cryptocurrency industry.”
It is unclear what measures the EU was taking, but the US had moved to request that many crypto exchanges limit Russians’ access to cryptocurrency. Sanctions are already being imposed on banks that offer connections to cryptocurrency exchanges, but closing all loopholes will be impossible.
The possibility of blocking those transactions is already in doubt, since a number of crypto exchanges have refused or are unable to freeze Russian crypto assets or stop transactions. Some have stated that they were unable to do so because not all Russians supported the war in Ukraine. According to one conversation, it distinguishes between Russian officials who initiate the war and ordinary Russian residents, and it will not impose a blanket ban.
It is also unclear how such prohibitions could be applied against decentralized wallets and exchanges, given that even crypto exchange CEOs have no influence over them. This week, it was revealed that Tether was being traded against the Rouble as a result of the currency’s decline due to sanctions.
Nothing stops Russia from adopting cryptocurrency to reverse the impact of sanctions imposed within or outside its borders. According to the CEO of Paxful, Russia, which is actively crafting crypto laws as a matter of survival, might be one of the eight countries that legalize Bitcoin.