Data from blockchain-analysis firms show that Russian denominated crypto purchasing and trading on major exchanges have faltered, debunking theories that the country will pivot to digital assets to circumvent sanctions.
When Bitcoin rallied over 15% last week, some industry experts attributed the surge to Russians buying cryptocurrency in the face of increasing economic sanctions. This theory seems to be proved false, however, as data from Chainalysis showed that ruble-denominated crypto trading volume was just $34.1 million on March 3, around half of a recent peak of $70.7 million a week ago on Feb. 24.
Speaking on the matter of sanctions-fueled crypto purchasing to Bloomberg, Citigroup analyst Alexander Saunders said, “Russian volumes have been relatively small so far, suggesting that the price action is more due to investors positioning for an expected uptick in demand from Russia, rather than Russian demand itself.”
Despite experts rejecting the idea that crypto could be used to help Russia skirt economic sanctions, the U.S. and the E.U. are still increasing their regulatory scrutiny of digital assets.
Recently, New York state increased its blockchain surveillance capacities to further prevent cryptocurrencies or digital assets from being used to support Russian interests.
NY Governor, Kathy Hochul issued an executive order on Feb. 27 directing state agencies to divest from Russian institutions and companies, as well as entities that provide them with support. She said:
“New York is proudly home to the nation‘s largest Ukrainian population and we will use our technological assets to protect our people and show Russia that we will hold them accountable.”
Highlighting the other side of the narrative, Jake Chervinsky, head of policy at the Blockchain Association in the U.S., went as far as to call these concerns about crypto “totally unfounded”.
1/ Russia can’t & won’t use crypto to evade sanctions.
Concerns about crypto’s use for sanctions evasion are totally unfounded. They fundamentally misunderstand:
– how sanctions work
– how crypto markets work
– how Putin is actually trying to mitigate sanctions
— Jake Chervinsky (@jchervinsky) March 1, 2022
Further echoing this sentiment was Ari Redbord, head of legal and government affairs at crypto crime investigator TRM Labs, stating that it’s too late for crypto assets to be able to provide enough liquidity for Russia and that the public nature of blockchains is already a sufficient deterrent for those seeking to circumvent sanctions.
“Russia cannot use crypto to replace the hundreds of billions of dollars that could be potentially blocked or frozen.”
Related: European Commission to remove Russian banks from SWIFT cross-border network
In the face of looming regulatory action from the international community, many of the world’s leading crypto exchanges have decided to blacklist sanctioned individuals and organizations. Binance, however, has refused requests to censor the accounts of “innocent” Russian customers.