Why Russia Is Unlikely to Turn to Crypto Following International Banking Blockade

There has been a lot of recent narratives on the possibility of Russia switching to utilizing crypto if it’s ostracized by the international banking system. However, this may not be the case and it may not be a good thing anyway.

Over the weekend, the United States and European nations decided to block certain Russian banks from the SWIFT payments system. Consequently, long queues have been seen at ATMs in Russia and the ruble has plunged 30% against the dollar today.

Crypto industry analysts and experts opined that the country could switch to digital assets to avoid the banking blockade if this was the case. However, not all are in agreement and some industry experts think that Russia will not be adopting cryptocurrencies any time soon.

Russia unlikely to adopt crypto

On Feb. 28, RippleNet general manager Asheesh Birla debunked this theory in a tweet on why he thinks that Russia will not evade sanctions using crypto.

Firstly, crypto is becoming more easily tracked so it would not be difficult to block Russian affiliated addresses and wallets. On Feb. 27, Ukrainian Vice Prime Minister Mykhailo Fedorov appealed to major crypto exchanges to begin doing exactly this.

Birla added that there “simply isn’t enough global liquidity to support Russia’s needs,” referring to the country’s foreign exchange markets. He added that fiat on and off-ramps are also heavily regulated making it more difficult to convert crypto back into cash.

“Russia conducts nearly $50B in FX [forex] transactions a day. As the largest crypto, bitcoin’s volume is usually between about $20-50B a day. Russia’s needs would encompass BTC and more!”

In essence, the lack of liquidity in crypto markets is the major obstacle to Russia adopting it for payments. It is also likely that President Putin has prepared for this and initiated partnerships with other countries such as China to facilitate capital transfers.

“Russia has had ample time to prepare, setting up direct banking relationships in Asia and elsewhere to get around correspondents,” he added.

A bearish scenario

Industry analyst Alex Krüger commented that it would be “dreadfully bearish” if Russia adopted crypto for one primary reason:

“US regulators would be pushed to crush the industry as a matter of national security,”

However, others argued that if Russia was to load up on Bitcoin and cryptocurrencies to circumnavigate sanctions and distance itself from dollar hegemony, it would legitimize the asset class.

Cryptocurrency has proved itself to be a censorship-resistant form of money. According to blockchain analytics firm Elliptic, the Ukrainian government has raised almost $19 million in crypto donations since the invasion began.