Crypto could bypass President Biden's 'devastating' sanctions on Russian banks and elites: Report

Published at: Feb. 24, 2022

The sanctions announced by United States President Joe Biden in response to Russia’s attack on Ukraine did not include cutting the country off from payments on the SWIFT system or cryptocurrency transfers.

In a Thursday announcement from the White House, Biden said the U.S. and its allies and partners would be enforcing sanctions aimed at imposing “devastating costs” on Russia due to “Putin’s war of choice against Ukraine.” The U.S. president announced that the country would sever its financial system from Russia's largest bank, Sberbank, as well as impose “full blocking sanctions” on VTB Bank, Bank Otkritie, Sovcombank OJSC, Novikombank, and their subsidiaries. Biden also named several elite nationals who have “enriched themselves at the expense of the Russian state” as part of the penalties levied against Russia.

However, speaking to reporters on Thursday, Biden announced that the economic measures would not extend to cutting Russia off from the SWIFT network — a payments system used across the world — in response to European officials. Leaving this option available to Russians and seemingly being unable to block cryptocurrency transfers could reportedly mitigate the impact of any sanctions levied by the United States and its allies. 

According to a Thursday report from Bloomberg, Russian billionaires could potentially circumvent any U.S. sanctions by using crypto to buy goods and services and continue to make investments outside countries experiencing harsher economic impacts due to the invasion. Individuals in Iran were able to solicit crypto donations for flood victims in 2019 — while under U.S. sanctions — and Venezuela President Nicolás Maduro proposed a bill in 2020 aiming to use crypto to evade different sanctions imposed on the country.

“If a wealthy individual is concerned that their accounts may be frozen due to sanctions, they can simply hold their wealth in Bitcoin in order to be protected from such actions,” said Quantum Economics founder and CEO Mati Greenspan.

Dmytro Kuleba, the minister of foreign affairs of Ukraine, urged against Russia being allowed to continue to use the SWIFT network. President Biden said that the sanctions imposed on the five Russia banks “will have equal consequence, maybe more consequence than SWIFT” but cutting off the country from the network would be held “as an option” if necessary. Neither Biden nor Kuleba directly addressed the possible impact of crypto in evading sanctions.

One thing to listen for this afternoon is whether these sanctions will include barring Russia from the SWIFT messaging system, which would cut it off from almost all international financial transactions.(Except crypto.) https://t.co/x952GNxbah

— Scott Bixby (@scottbix) February 24, 2022

Biden’s actions came following reports Russia had launched an invasion of Ukraine, bombing a military airport near the capital city of Kyiv and striking targets across the country with missiles. With the addition of U.S. troops sent to Germany and Poland in response to the attack, Biden seems to be going after Russia both economically and with a show of military force.

However, a New York Times report suggested sanctions may not have the impact for which the U.S. president is aiming.

“Russia has had a lot of time to think about this specific consequence,” said former federal prosecutor Michael Parker. “It would be naïve to think that they haven’t gamed out exactly this scenario.”

Related: Russia to seize retail deposits if sanctions go too far, official warns

The situation in Ukraine is still developing, but the financial impact of the attacks has reached crypto and traditional markets. The Bitcoin (BTC) price fell into the $34,000s on Feb. 24 amid news of the invasion but has since recovered to trade above $38,000 at the time of publication.

Tags
Regulation
United States
Cryptocurrencies
Government
Russia
Sanctions
Ukraine
Related Posts
US lawmakers and Fed chair push for crypto regulation in wake of Russia sanctions
Federal Reserve Chair Pro Tempore Jerome Powell and some members of the U.S. House of Representatives called for congressional action on crypto in response to discussions about Russia potentially evading sanctions. In a Wednesday hearing of the House Financial Services Committee on “Monetary Policy and the State of the Economy”, California Representative Juan Vargas asked Powell if cryptocurrency could be a "way out" for Russia looking for financial transactions in the wake of the U.S. and European Union cutting the country off from the SWIFT payments network. The Fed chair said that the situation with Russia "underscores the need for …
Regulation / March 2, 2022
US Treasury Dept lists digital currencies as part of effort to sanction Russia’s government
The Treasury Department and reportedly the White House are warning U.S.-based companies and individuals not to facilitate crypto transactions sent to certain Russian nationals and banks. According to regulations from the Treasury Department’s Office of Foreign Assets Control scheduled to go into effect on March 1, U.S. residents may not use digital currencies to benefit Russia’s government — including the country’s central bank — as an attempt to circumvent U.S. sanctions in response to the invasion of Ukraine. The guidelines equated crypto transactions to “deceptive or structured transactions or dealings” in attempting to evade sanctions. Treasury Secretary Janet Yellen said …
Regulation / Feb. 28, 2022
US and EU double down on measures against Russia potentially using crypto to evade sanctions
The United States and European Union have announced new actions targeting Russia’s economy and wealthy individuals as a report suggests Vladimir Putin’s allies have attempted to circumvent sanctions using cryptocurrency in foreign countries. In a Friday announcement, the White House said leadership from the United States, Canada, France, Germany, Italy, Japan, the United Kingdom, and the European Union will take additional actions aimed at economically isolating Russia in response to President Vladmir Putin’s military invasion of Ukraine. The announcement includes banning imports of many Russian goods, banning the export of luxury goods to Russia, and guidance for the U.S. Treasury …
Regulation / March 11, 2022
US lawmakers introduce bills that could force crypto exchanges to cut ties with Russian wallets
Representative Brad Sherman will be introducing a bill in the House aimed at cracking down on U.S. businesses handling crypto transactions for Russian banks and individuals. Speaking at a hybrid markup meeting with the House Financial Services Committee on Thursday, Sherman said he will be introducing a companion bill to Senator Elizabeth Warren’s legislation that would give the Biden administration “explicit authority to require that crypto exchanges that are subject to U.S. law stop facilitating transactions with Russian-based crypto wallets.” Warren first announced the legislation on March 8, later saying during a Senate Banking Committee hearing she will be introducing …
Regulation / March 17, 2022
The world has synchronized on Russian crypto sanctions
In her monthly Expert Take column, Selva Ozelli, an international tax attorney and CPA, covers the intersection between emerging technologies and sustainability, and provides the latest developments around taxes, AML/CFT regulations and legal issues affecting crypto and blockchain. According to the United Nations High Commissioner for Refugees, also known as the UN Refugee Agency, nearly 4 million Ukrainians have fled their homes since bombs began falling and bullets started flying on Feb. 24, with most heading to neighboring Central European countries. At the same time, people around the world have sent over $100 million in crypto donations to support Ukraine, …
Blockchain / April 2, 2022