Russia could turn to cryptocurrency if it is banned from the SWIFT payments system. Analysts have warned that if Russia is able to use crypto to evade sanctions, “political support in the U.S. for crypto will fall and regulatory risk will rise.”
Crypto faces regulatory risks if used by Russia to evade sanctions
Amid growing talk of banning Russia from the SWIFT global interbank payments system following its invasion of Ukraine, some analysts have warned that Russian President Vladimir Putin may turn to cryptocurrency to escape to penalties.
“We believe Washington is worried that Russia will use crypto to evade sanctions,” Cowen Washington Research Group analyst Jaret Seiberg reportedly said Friday. He added:
If Russia is able to use crypto in this way, we believe political support in the United States for crypto will decrease and regulatory risk will increase.
Seiberg believes that since most global trade is still dollar-denominated, it could be challenging for Russia to use crypto to evade SWIFT.
“Paying in bitcoin requires a conversion to dollars, which helps track activity… This also works in favor of crypto,” he said.
If Russia is unable to use cryptocurrency to circumvent sanctions, however, analysts believe that it could boost the viability of crypto in the eyes of regulators.
Seiberg explained that political support for crypto would increase if crypto exchanges help maintain US sanctions and if the government can track breakouts using blockchains.
Noting that “For crypto, this could be the crisis that determines how the government treats its use for payments and as a store of value,” the Cowen analyst warned:
The pressure would be on trading platforms and wallets… It wouldn’t be just in the United States. We expect this to apply equally to the UK, EU and Western allies in Asia.
The U.S. Department of the Treasury sanctioned two Russian crypto exchanges last year. Suex and Chatex were found to have processed transactions tied to ransomware attacks and other illegal activities.
The Treasury Department identified cryptocurrency as a major threat to sanctions programs in a report released last year. “We recognize the risk that, if left unchecked, these digital assets and payment systems could impair the effectiveness of our sanctions,” the Treasury Department explained.
