The United States, the United Kingdom and several other European countries have recently agreed to exclude a number of Russian banks from SWIFT. Some experts now believe that Russia may be able to circumvent some of these sanctions by using bitcoin and digital currencies. But is such a thing really possible?
According to Crypto Slate, after the invasion of Ukraine by Russian forces, several countries, such as the United States and members of the European Union, imposed severe economic sanctions on the country. One of the sanctions is that some Russian banks will no longer have access to the World Banking Association (SWIFT).
The sanctions are likely because previous sanctions were not enough to stop Russia, and Western countries have been forced to evict several Russian banks from Swift.
It is worth noting that more than 11,000 financial institutions around the world, with the exception of Iran and North Korea, use this network. With the expulsion of Russian banks from the global financial system, Russia could hardly spend its $ 640 billion in international reserves.
Investment expert Bill Ackman tweeted that sanctions could certainly affect the Russian people.
Personally, I am reluctant to keep my money in a bank that does not have access to the Swift system. When a bank fails to receive or transfer money from other banks, its financial capacity is jeopardized. If I had lived in Russia, I would have withdrawn my money from the banks right now. As of Monday, Russian banks may face large cash flows.
Certainly such severe sanctions have a devastating and catastrophic economic effect on the Russian economy. At the same time, many analysts believe that Russia has no effective way to deal with these sanctions. According to them, even Chinese blockchain technology, digital currencies and especially bitcoins cannot help the country.
Niraj Agraval, communications manager at Coin Center, a digital currency think tank, said:
The US Treasury Department knows that Russia cannot use a lot of digital currency to circumvent sanctions, and there is no danger. We are talking about a lot of money. It is not possible to hide such money in the Head Office of digital currency.
Digital currencies are neutral, open and uncensored, and traders do not need anyone’s permission to conduct their transactions. As a result, they are “theoretically” the right tool to circumvent sanctions in a country like Russia. If Russia’s partners accept digital currencies, it could trade bitcoin internationally. That is, the use of bitcoin and other decentralized digital currencies to circumvent sanctions depends on the views of Russia’s allies and partners.
In addition, Russia has been working on various options for some time. For example, the country’s national digital currency, the digital ruble, is currently being tested.
Matti Greenspan, an investment expert and market analyst, wrote on Twitter:
The expulsion of Russian banks from Swift is not good for bitcoin; Because this will force them (Russian officials) to fully accept this digital currency.
Russia will not be the first country to do so if it wants to use digital currencies to circumvent sanctions. Existing reports show that North Korea is currently funding its nuclear and ballistic missile programs using digital currencies that have been stolen by government-backed hackers from various institutions.
Using alternative Swift methods remains a challenge; Because all countries are widely accepted and use this network. As a result, other methods are not able to compete well with it.
Russia, for example, is launching an alternative system called SPFS 2020, which is used by only 20 percent of Russian banks. Even China’s interbank payment system (CIPS), better known as the Russian system, accounts for 0.3% of Swift’s international transactions.
Despite all the obstacles, bitcoin can play a very important role in this regard, and the extent to which Western economic sanctions against Russia are effective depends to some extent. Of course, we must also keep in mind that Russia’s trading partners must work with Russia in this regard; Otherwise, bitcoin and digital currencies will not cure the sympathies of this country.
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