Russia Can’t ‘Easily’ Use Bitcoin To Ease Sanctions — Here Are The Stumbling Blocks

• Russia’s switch to cryptocurrencies will not be as seamless as the general public anticipates.
• Thinly traded markets and obedience to sanctions are part of the hurdles that the country will have to maneuver.
• Bitcoin whale accounts have spiked in recent days, fueling speculation that Russia’s elites are turning to cryptocurrencies.

As sanctions against Russia intensified, experts believe that the country will turn to cryptocurrencies to circumvent them. While it seems like a fairly straightforward move, it will require a herculean move to make the switch.

Hurdles To Be Crossed

The US and its allies have alienated Russia by kicking the country from SWIFT as part of the efforts to rein in its war effort. This has the intended effect of limiting the country’s capacity in making international transactions and Alexi Kudrin, a former finance minister, thinks the Russian economy could lose 5% of its size.

These crippling effects of these sanctions could see the country turn to cryptocurrencies as a way out. However, it faces the steep challenge of not having enough liquidity to make the switch because of “thinly traded markets.” The Ruble to Bitcoin market is about $200,000 of liquidity, making it unlikely for the country to turn to Bitcoin.

Another stumbling block that Russia could face is that the “endpoint to get money off crypto is highly regulated,” says Asheesh Birla, General Manager of RippleNet. The exec thinks that even if Russia finds a way around the liquidity problem, there is still the problem of exchanges having to leverage on banks to move funds out. The option of using decentralized exchanges as a way out imposes the problem of being less liquid than centralized exchanges.

Centralized exchanges have pledged to obey sanctions against Russia but have stated in unequivocal terms that they will not unilaterally block accounts of millions of citizens. With cryptocurrency exchanges being hawkish in looking out for accounts that have been sanctioned, Russia’s plan to embrace cryptocurrency could be brought to a grinding halt.

Russian Roulette With Cryptos

Historically, Russia has not been receptive to the widespread usage of cryptocurrencies. The country has often flirted with the idea of an outright ban against the asset class citing environmental concerns but made a U-Turn with plans to regulate them. The absence of existing frameworks could also impede a potential switch by the bulk of the populace.

However, at the start of the week, on-chain data indicated a 5% spike in the number of Bitcoin whales. The number of addresses with a balance of at least 1,000 BTC climbed to 2,226 and some industry players believe that Russia’s elites could be behind the latest metric. Trading volumes between the USDT and the Ruble have spiked to unseen highs of over $25 million in a single day.