How Bitcoin, Other Cryptocurrencies Could Serve As Workaround For Russians Facing Global Sanctions

The geopolitical tension surrounding Russia's invasion of Ukraine is intensifying. In retaliation to Russia's attack on the sovereign nation, Western nations have either imposed or are contemplating sanctions against the country.

Although cryptocurrencies have sunk deep into the red in reaction to the Ukrainian crisis, analysts see the space as a potential beneficiary. 

What Happened: The sanctions may not produce the intended effect in Russia, where cryptocurrency ownership is relatively higher, according to Bloomberg. The country is also taking steps to legalize cryptos.

Earlier this month, Russian newspaper Kommersant said the Central Bank of Russia and the government have agreed on cryptocurrency regulation, likely paving the way for recognizing digital currencies as a form of payment.

Cryptos such as Bitcoin BTC/USD could be the most effective way to avoid sanctions, as these are sent directly between people without any intermediary. On the contrary, fiat currencies need third-party institutions such as banks to facilitate the exchange. These intermediaries can be tapped to track, freeze or completely block transactions.

Cryptocurrency holders can keep digital currencies in wallets with different addresses across several exchanges, making tracing difficult, Bloomberg said. Holders can also choose cryptocurrency exchange outside the purview of nations imposing sanctions, it added.

"Neither dictators nor human rights activists will encounter any censor on the Bitcoin network," Bloomberg said, citing Matthew Sigel, head of digital assets research at VanEck.

Related Link: Why The Ukraine Conflict Will Augment This Sector's Growth By 2-3%: Analyst

Russian Billionaires May Take To Cryptos: Billionaires who are affected by the sanctions have recourse with Bitcoin and other cryptos, Bloomberg said. They can use cryptos for purchases and to invest in assets outside of Russia, the report said.

None of the billionaires named in the sanctioned have disclosed whether they hold cryptos, the report said.

One pushback would be the difficulty involved in converting cryptos to fiat currencies. It is near to impossible to do the conversion through centralized exchanges without getting caught. 

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