Mar 12, 2022
Crypto during War
How is Crypto impacting the ongoing War between Russia and Ukraine?
Unless you’re living under a rock, you’ve probably heard about the Russia-Ukraine war that is currently underway.
I do not support Russia in the war and I hope a peaceful resolution is reached as soon as possible. Today, I have explored the possibility of Russia using Crypto to win the war, a sentiment that is prevalent in many Twitter circles.
There have been many horrifying scenes emerging from Ukraine in the past few weeks. Donations are pouring in from around the world. Ukraine has officially asked for donations in Bitcoin and Ethereum. This is because it is easy to send money globally via Crypto.
NATO has imposed several financial sanctions on Russia as a means to impose economic pressure. This has caused the Russian Ruble to tank spectacularly.
Russia has the fifth-largest pile of foreign currency. Vladimir Putin may buy Ruble using these currency reserves to stabilize the Ruble.
Another option for Russia is to buy a lot of Crypto.
By its very nature, Cryptocurrency assets are difficult to freeze. Russia can utilize Crypto to get around the economic sanctions, right? This might be a lot harder than you realize.
Even though Russia cannot be banned from the Bitcoin Blockchain unilaterally, Crypto Exchanges doing business in Western countries can ban Russian accounts. Hence, the option of buying Bitcoin in bulk using Crypto exchanges may not work.
A huge amount of liquidity is needed every day to fund the war. Russia can use illegal ways of buying Bitcoin but since the blockchain is public, only a limited amount of money may be exchanged.
It is now becoming difficult to use Bitcoin to launder money. Just a few weeks ago a pair of influencers were caught trying to launder Bitcoin worth billions of dollars. Yes, they were amateurs compared to the Russian State Cyber Security but you get the point.
So the two options of accumulating Crypto that Putin had through Exchanges and the black market may not work as effectively as most people think.
There is another option: steal Bitcoin. Russia leads the world in Ransomware attacks. Typically in Ransomware attacks, the attackers get access to the victim’s computer and encrypt files. Then, they demand Bitcoin to give back the files. In 2021, Russian hackers claimed 74% of Ransomware attacks. This will again not solve Putin’s problems. Using Ransomware attacks, Russians made $400million which is a considerable amount of money but not enough to fund the war effort which will require billions of dollars every day.
Even though Putin would love to use Crypto to evade the economic sanctions, it doesn’t look like he can. The scale that Russia needs to move is just not compatible with today’s Crypto markets.
Disclaimer: This is purely my opinion and should not be regarded as a primary source. I am not a financial advisor. Reader discretion is advised.
Reference: https://www.bbc.com/news/technology-60378009
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