The United States and its allies have imposed sanctions on Russia over its invasion of neighboring Ukraine. This has brought what can cryptocurrency do into the discussion.
Russia is on economic chokehold for its invasion which has made some governments and companies stop their affiliation with the nation. For example, companies like Visa, Mastercard, and PayPal have suspended their services in Russia.
This is already having an effect in the nation as credit and debit cards issued by the Russian banks will no longer work outside the country. Russian businesses are also not able to accept cards issued from outside the country.
To avoid these sanctions that are already crippling the Russian economy, many have mentioned cryptocurrency as a way out. The world’s financial crisis of 2008 led to the introduction of Bitcoin. This same crypto has been predicted to have a leap with the recent conflict.
The question today is what role is cryptocurrency playing in the Russia-Ukraine conflict?
What Really is Cryptocurrency?
Cryptocurrency is a digitally encrypted, decentralized currency that is not linked to or regulated by any government or central bank.
It is based on blockchain technology, which is a distributed ledger framework. Blockchain is a distributed ledger that is managed by a network of computers that maintains an exact copy of the database and updates its records by consensus based on pure mathematics.
Bitcoin is the first cryptocurrency created which has led to the creation of others alike which include Ethereum, Cardano, Dogecoin, Tether, etc.
Cryptos are categorized as virtual or digital currencies. They were originally developed to provide an alternative mode of payment for online transactions.
However, cryptocurrencies have not yet been generally adopted or legalized by many nations and are actually too unreliable to be used as payment method
How can Cryptocurrency Help To Avoid Sanctions In Russia?
Bitcoin, which is the world’s most popular cryptocurrency is fully decentralized. The majority of the digital coin’s trading is done on a peer-to-peer basis.
The fact that crypto has no middleman, unlike with banks, makes it a good option for Russians who can’t make use of their accounts for transactions. Crypto transactions are recorded on blockchain which doesn’t entertain a 3rd party.
Can Russians who can’t make use of their credit/debit cards turn to cryptocurrency for transactions? This is a question that needs to be answered.
Can Cryptocurrency Be Used To Avoid Sanctions?
It’s no longer news that Russia-owned companies outside Russia as well as Russia figures have been hit with a number of economic sanctions. This is aimed at cutting the country off from the global financial system.
Top Russian firms such as Aerosoft as well as businessmen like Roman Abramovich were in the news recently for sanctions outside the oil-rich nation. The sanctions have caused the Russian ruble to plunge.
Can crypto assets like Bitcoin be a way for those hit with sanctions to evade restrictions? The answer is NO. This is because of a number of challenges.
The first is that it is possible to track the movements of funds from one account to another because of blockchain’s public ledger of activity. This doesn’t make it an easy tool for avoiding sanctions.
Another reason is that there isn’t enough liquidity for Russian Oligarchs such as Roman Abramovich and companies to move their money. Liquidity in crypto is still a fraction of the global currency market, so using large amounts of money using crypto is difficult. This will also make crypto exchanges to be on a high alert.
What’s the Position of Crypto Exchange on the Use of Crypto to Avoid Sanctions
The world’s leading crypto exchanges has reacted to the use of cryptocurrency to avoid sanctions in Russia. According to Changpeng Zhao, the founder of the world’s top exchange, Binance, has stated that cryptocurrencies won’t help Russia evade sanctions.
Zhao maintained that crypto is too small for Russia. The adoption of cryptocurrency globally today is about 3% of the global population. Out of this 3%, only a small percentage have their net worth in cryptocurrency.
The Binance boss stated that although that blockchain used by crypto is decentralized, it can be scrutinized by anyone. He added that using privacy-focused digital currencies such as Monero would not work either. This is because the market cap of Monero is $3 billion compared to Russia’s GDP of $1.5 trillion.
The Binance founder has however donated $10 million to aid the humanitarian effort in Ukraine. This will help those fleeing the conflict even if his platform can’t be used to evade sanctions by Russians.
Although cryptocurrency can’t help to avoid sanctions in Russia, it might grow than ever before in the oil-rich nation. Crypto enthusiasts have stated that $3 trillion market offers stability in an increasingly volatile world. No doubt, crypto have become increasingly mainstream today.
This is backed by the fact that the President Joe Biden of the United States recently signed an executive order. The order is to require the government to access the risks and benefits of creating its own Central Bank Digital Currency (CBDC).
China had earlier created its own version of the CBDC which shows that the future is in digital currency. Who knows the crypto route Russia would take after its conflicts with Ukraine and its top allies?
Also Read– Is Cryptocurrency a Good Investment In 2022?
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