How Tenable Could It Be For Russia To Use Cryptocurrency To Evade Western Sanctions?

An argument has been made that Russia could use cryptocurrency to circumvent Western sanctions on its economy for invading Ukraine. But is it tenable? 

The sanctions have triggered a massive crash of the rouble, the Russian currency.

During the initial days of the invasion, the rouble lost nearly half of its value, going from 84 roubles per dollar to as high as 154 roubles a dollar by March 7. However, it has recovered to about 109 roubles against the greenback by Wednesday morning.

This recovery is attributed to the ongoing talks between Russia and Ukraine to reach an agreement to end the war.

Meanwhile, the fear of hyperinflation goaded Russians to put their money into cryptocurrency initially, but they have remained flat after that. 

Also, Russian oligarchs appear to have largely stayed away from trading in cryptocurrency after the sanctions were imposed, suggesting either they have decided to wait until the sanctions start to bite or see the cryptocurrency industry with heightened suspicion, despite initial optimism.

In any case, the cryptocurrency industry is unlikely to offer much leeway to Russia to sidestep the sanctions. Because, as experts say, crypto exchanges would need banking partners to convert these virtual coins into fiat money (either the US dollar or rouble). 

With the Western sanctions in place, it's unlikely that Russian exchanges would be able to convert their digital assets into fiat money en masse and not get caught in the process. The banks facilitating these trades could even lose their licences.

The Western sanctions imposed on Russia include removing selected Russian banks from the international financial system SWIFT, or Society for Worldwide Interbank Financial Telecommunication. 

SWIFT is a co-operative of over 11,000 banks and institutions from more than 200 countries that allow smooth transfer of money across borders. 

The US sanctions also bar Americans from trading with Russia, so US citizens or companies cannot trade with Russia irrespective of the payment systems they use (cash, cryptocurrency or gold).

Experts say the only viable option for Russia is to use cash to trade with individual countries. But that is not sustainable in the long run, they add, as its cost would be too high.