After the new economic sanctions imposed by the West, the Russian ruble is under pressure and has already depreciated sharply against the US dollar (see Figure 1). To support the currency, the Russian central bank has already reacted and raised the key interest rate to 20 percent. One of the goals is said to be to protect citizens’ savings from depreciation. In addition, the central bank prohibited the sale of securities abroad.
The West is also tightening sanctions against the Kremlin. In the fourth package of sanctions, European Union (EU) more sanctions against Russia. This shows that, among other things, trade with the Russian central bank will be banned. In addition, all assets of the Russian central bank abroad will be frozen. Also various private payment service providers such as visas and MasterCard they have now participated in the sanctions and have excluded several Russian financial institutions from their payment network. There were also images of long queues online. Metro stations in Moscow the round after Google and apple payment ceased their services in the country.
So what do you do if your own country’s currency collapses? It would be obvious to flee to tangible assets such as shares or real estate. However, the Russian central bank quickly put an end to this loophole and suspended trading on Monday, February 28. The suspension was then extended through Tuesday. It is currently unclear whether further interventions will follow. In addition, Russian President Putin imposed a ban on transferring foreign currency abroad. Even before sanctions were tightened, the Russian Leading Index (RTS) had already fallen by a third.
The nervousness of the Russian population has increased markedly in recent days. Long lines are already forming in front of banks, reinforcing many’s fear of a bank run. In such a situation, cryptocurrencies like Bitcoin offer an interesting alternative. This flight could be observed in the past, although to a much lesser extent, in Turkey, for example, when the Turkish lira was extremely devalued there. Figure 2 shows how much the bitcoin price has risen against the ruble in the last few trading days. The strong price movement began on Sunday, February 27. Since then, the price has risen nearly 45 percent.
Therefore, it is understandable that many Russians consider the path through Bitcoin and Co. one of the few ways to avoid sanctions or even to save the remaining savings. The particularly high trading volume in rubles suggests that this flight into cryptocurrencies is already in full swing, BTC-ECHO reported.
However, early voices were quickly raised, taking this development as an opportunity to demand tougher action from crypto regulators. One of the most prominent was US Senator Elizabeth Warren, considered a staunch opponent of Bitcoin.
In her Twitter post (see above), the 72-year-old refers to a New York Times-Article revealing that Russian companies and oligarchs are using many cryptocurrencies as a loophole to circumvent Western sanctions. The article also mentions that Russia could also use its digital ruble in the future to save itself diversion through the US dollar.
To close this loophole, Ukraine’s Digital Minister Mykhailo Fedorov on Sunday, February 27, called on some of the world’s largest crypto exchanges to not only freeze the accounts of individual users, but also those of the population. Russian in general (see tweet below).
The crypto exchange binance had already shown cooperation and announced the freezing of some Russian accounts, we reported. They want to put together a kind of working group that “could take the necessary measures.” A precise procedure has not yet been established, but targeted action against individual Russian decision-makers would be conceivable. At the same time, Binance emphasized to the US news channel. CNBC:
Cryptocurrencies are designed to offer more financial freedom to people around the world. Unilaterally deciding to ban people from accessing their cryptocurrencies would go against the very reason cryptocurrencies exist.
octopusesCEO Jesse Powell posted a statement on Twitter on February 28. He can understand the Ukrainian digital minister’s concerns, but Kraken cannot just freeze accounts without a legal obligation.
Other exchanges like FTX or crypto.com At the time of writing this article, they had not yet commented on the extent to which they intended to respond to the request of the Ukrainian digital minister.
The appeal of Ukraine’s digital minister was also addressed to the publicly traded trading platform. base of coins. This does not offer any service in Russia. However, users can send crypto to Russian addresses. In a statement, the company said it will not introduce blanket bans on transactions with Russian addresses, but will only block accounts or transactions involving sanctioned individuals or organizations. A unilateral and total ban would punish ordinary Russian citizens, Coinbase said.
Amidst this geopolitical tension, Bitcoin and Co. are currently in an extremely precarious position. so appropriate that the Washington Post Just days ago he called the war the world’s first “crypto war.” As shown now in Russia and Ukraine as well, Bitcoin is doing exactly what it was designed to do. It protects the population from the rapid depreciation of the respective national currencies and thus reduces dependency on central authorities.
The fact that Russia, especially the Kremlin, is increasingly relying on cryptocurrencies in the event of further isolation should surprise no one. Whether the Kremlin will rely entirely on Bitcoin in the event of a full delisting of SWIFT or rather on a specially created CBDC is still not entirely clear at this point. However, there is a risk that the political conflict spills over into the cryptocurrency market, for example, with Russia becoming increasingly reliant on Bitcoin. This would be fodder for all critics of Bitcoin and would ultimately mean a huge headwind for the entire crypto space.
However, it should also not be forgotten that more than $30 million has already reached Ukraine in the form of crypto donations. On Tuesday, March 1, the news came that Ukraine would now accept polka dot donations.
It should now be clear to anyone who has touched on the underlying issue a bit that cryptocurrencies like Bitcoin cannot simply be banned. On another page, however, is the question of why cryptocurrency exchanges as businesses should enjoy a special position in terms of Russian sanctions. After all, many banks have agreed to freeze Russian assets abroad.
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Kryptokompass is the leading German-language magazine on Bitcoin, blockchain and cryptocurrencies.
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