- Russians are taking to cryptocurrencies to conduct transactions as even Visa and Mastercard have exited the Russian market in protest of the invasion of Ukraine.
- Yet it’s only really a matter of time before Western governments move to close the cryptocurrency loophole that Russians may be using to avoid sanctions.
Given the comprehensiveness of Western sanctions on Russia, ordinary Russians (and perhaps some extraordinary ones as well) are taking to cryptocurrencies to conduct transactions as even Visa (-4.79%) and Mastercard (-5.39%) have exited the Russian market in protest of the invasion of Ukraine.
Data from blockchain analytics firm Kaiko show that ruble-denominated Bitcoin trading volume rose over the weekend to its highest level this year, with the average trade size hitting a high on cryptocurrency exchange Binance of around US$580, suggesting that it’s mainly retail demand that is driving the trade.
The other cryptocurrency that is highly sought-after by Russians are Tether or USDT, the dollar-based stablecoin that is allegedly backed 1 to 1 with the actual U.S. dollar.
Nevertheless, that uptick in Russian Bitcoin demand has failed to lift prices, which have been dragged down by global concern over the continued Russian invasion of Ukraine and soaring commodity and energy prices.
Russia only accounts for a fraction of the total volume of Bitcoin’s demand globally, although the true picture is probably harder to determine since Bitcoin wallet addresses and peer-to-peer trading on decentralized exchanges make determining geography of these transactions difficult.
According to Kaiko, Bitcoin trades on average between US$20 billion to US$40 billion daily, and over the weekend, the ruble pair with Bitcoin was around US$14.2 million, a drop in the ocean.
Globally only three cryptocurrency exchanges offer a ruble-denominated pair with Bitcoin, including Yobit, Binance and LocalBitcoins, according to Kaiko.
Yet it’s only really a matter of time before Western governments move to close the cryptocurrency loophole that Russians may be using to avoid sanctions.
U.S. President Joe Biden is set to sign an executive order some time this week that will outline his administration’s strategy for cryptocurrencies which may include mandatory reporting requirements that prevent evading sanctions using cryptocurrencies.
And Russians who have swapped real dollars for Tether may also be in for a surprise as last week, Tether’s CTO tweeted that his company, which issues Tether “has to comply with requirements of central authorities.”
Last year, following a hack of Poly Network, Tether unilaterally “unrecognized” around US$33 million worth of USDT, as part of a concerted grassroots-led effort to prevent the proceeds of the hack being exploited.