Given the traceability of blockchains and the potential for even more stringent sanctions against Russia, experts are skeptical that it will be successful.
Recent statements from senior Russian leaders indicate that the law’s objective is to employ cryptography as a means of circumventing sanctions.
The law grants the central bank of Russia the authority to supervise a “experimental” regime. In an effort to circumvent international sanctions, Russia will commence the trial of cross-border crypto payments next week. However, this endeavor may prove unsuccessful, according to numerous policy and legal experts who spoke with CoinDesk.
The legislation that was enacted at the end of July and promptly signed into law by President Vladimir Putin does not remove the current prohibition on the use of cryptocurrencies as legal tender for routine payments within Russia. Rather, it permits cross-border payments with crypto.
It is unclear how the law will permit such payments, as the legislation does not establish specific regulations for such transactions. Rather, it transfers authority to the central bank of Russia to supervise a “experimental” system, according to experts.
Following its invasion of Ukraine, the United States and other nations implemented a series of sanctions that have significantly impacted Russia’s economy.
The United States, the United Kingdom, the European Union, Australia, Canada, and Japan have imposed 16,500 sanctions on Russia since the invasion of Ukraine in February 2022.
Valerie Kennedy, the director of investigations at blockchain analytics firm Chainalysis, stated to CoinDesk, “The adoption of these measures by the Russian government signifies a continuance of Russia’s evolving strategy to circumvent Western sanctions.”
According to the European Union, approximately half of Russia’s total foreign currency reserves, which amount to 300 billion euros ($332 billion), were blocked. This included 70% of the assets of the Russian banking system. The Society for Worldwide Interbank Financial Telecommunication (SWIFT), an interbank messaging system, disconnected certain Russian institutions.
“Russia has encountered significant challenges in circumventing the U.S. dollar and euro through the SWIFT system, which has resulted in an elevated risk of secondary sanctions,” she continued. The purpose of secondary sanctions is to prevent any third party from engaging in trade with a sanctioned nation.
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