Will Russia rely on crypto following new international sanctions?

Written by Mark Basa, global brand and business manager at HOKK Finance

Since the U.S. Russian sanctions were passed on February 21, 2022, it set off a chain reaction of global economic sanctions. As this war progresses, it’s the citizens of Russia who are feeling the sharpest point of the sting as their nation is shunned further into isolation from the global financial system.

The rate of the Russian ruble has fallen beneath that of the U.S. cent, diminishing their purchasing power. Cutting ties with foreign companies and financial institutions has limited their payment methods and capped the amount of physical currency that can be withdrawn from banks. Retail prices are climbing as product shortages are beginning to show due to stockpiling of goods.

In a state of national panic, there need to be alternative measures in place to facilitate Russia through this war. Here is where the use of cryptocurrencies can swoop in and offer assistance.

The Big Attraction of Crypto Despite Its Negative Rep

Cryptocurrencies are decentralized. Centralized banks such as the World Bank, the International Monetary Fund, and the European Central Bank, as well as the governments with which they cooperate, have no jurisdiction, control, or influence over the maintenance of power in friendly and hostile nations. This frightens the mainstream institutions as if successfully integrated into everyday financing can threaten the very purpose of intermediaries.

Despite the blockchain technology, underlying cryptocurrency being inherently secure, the main risk from a user’s perspective is losing their private key that grants access to their coins—and with it, all their holdings. And then there are hacks, phishing attacks, and all the other malicious methods used to gain control of users’ accounts. More and more regulatory frameworks are being set in place worldwide to ensure even the most inexperienced cryptocurrency users can be protected from such security risks.

In March 2022, President Biden took the first steps towards securing the responsible development of digital assets in the United States by issuing a new executive order. Amongst the order’s objectives are protecting consumers from financial and cybersecurity risks, promoting affordable and inclusive financial services, preventing illicit financing and national security threats, whilst encouraging privacy and security, and boosting U.S. economic and technological leadership. The EU has also followed suit and issued a new Markets in Crypto Assets (MiCA) framework to aid in market development.

A Simple Solution Russia Can Incorporate Today

Visa and Mastercard, the world’s two largest credit card networks, as well as PayPal, have ceased operations with Russia. Banks in Russia will not be able to issue credit and debit cards that work outside of the country, whereas the businesses and cash machines in Russia will not accept cards issued from outside of the country.

The answer here would involve a means of issuing and receiving payment (for personal purchases) via card. This can be achieved without breaching sanctions if Russian citizens were to convert rubles to cryptocurrency and use blockchain networks as a means of payment. Such cryptocurrency payment gateways exist that still accept transactions from Russian users, despite the recent call of Ukraine’s digital transformation minister, Mykailo Federov, for all major crypto exchanges to block all associated addresses.

The volatility of tokens such as Bitcoin have been a deterring factor when it comes to the broader adoption of cryptocurrencies. The Federal Reserve signals toward stablecoins being the way forward in a recent paper directly discussing this concern. In addition to being built to hold up to volatility, they can also offer mobility and accessibility unlike other cryptocurrencies.

Cryptocurrencies can be used to help Russia get back on track amidst its economic crisis. The likelihood of this happening is entirely based on the personal preference of businesses, organizations and individuals who choose to participate.

 

To Conclude

On March 11, 2022, The White House announced that the United States, along with the other G7 leaders and the European Union, will issue further economic costs on Russia. These include the banning of various imported goods from signature sectors of Russia’s economy.

The higher global leaders continue to stack sanctions against Russia, the more is being taken away from its civilians who are trying to continue living a stable life amongst the chaos. Whether Russia incorporates a crypto-empowered strategy in the long term remains to be seen.

About Lisa Baker, Editor 2419 Articles
Lisa Baker is the Editor of Always Finance, and writes about Business, Finance Technology and Healthcare. Lisa is also the owner of Need to See IT Publishing.