Russia Meets Cryptocurrency — The Intersection May Have Grave Consequences

For the past ten weeks, Russia’s advance into Ukraine has exhibited more elements than pure bloodshed. Western nations have slapped sanctions on Russia, weakening its economy and condemning its war crimes. What's more, the European Union aims to phase out oil dependence on Russia. Put simply, these economic weapons are costing Russian oligarchs their yachts. Yet we can’t forget that this is the first war with cryptocurrency — one where sanctions and politics are much more complex. 

American foreign experts have expressed concerns about Russians dodging sanctions. Oligarchs, in particular, are known to use crypto as an evasion avenue. Through crypto, oligarchs can receive dark and sanctioned forms of profit. Meanwhile, with excess oil, Russia uses crypto in nations such as Ecuador (see our other article) to funnel gas exports. If crypto weakens the degree of sanctions, Russia will continue to terrorize Ukrainins uncompromisingly. 

Already, Russia accounts for the third-largest bitcoin mining center. By capitalizing on sanctions, however, it may become the first. Because sanctions reduce gas and energy exports, Russia uses untapped resources for bitcoin mining. This way, Russia can prop up its bitcoin assets while not letting the natural resources go to waste. While much more discrete, this is another invasionary tactic used in this war of attrition. Russian mining’s environmental impact is another chilling thought to be considered. 

Sanctions have crippled Russia’s currency — the Ruble. And to make ends meet, many innocent Russian civilians have used crypto as their regular transaction currency. In the economic realm of war, the Ruble has plummeted to a value of one US Cent. With the West winning this realm, fintech ensures that Russian Citizens who criticize Putin can withstand the punishing pressure of sanctions. Thus, an absolute ban on Russian crypto users would stoke the flames of poverty, hurting the most innocent in Russia.  

Companies have similarly rejected Western proposals to invalidate Russian cryptocurrency. Thus, the US must create a pointed solution. Its motto should be straightforward: target the Oligarchs, not the people. Ensuring that the rich, who fuel Putin’s megalomania, lose wealth may cool political temperatures. It will temper Russia’s power and ability to escape. 

Nonetheless, this discussion couldn’t exclude Ukraine. While the West has treated cryptocurrency in Russia as the enemy, it is a heavenly tool for Ukraine. Over $100 million was funneled through crypto to support the army. The government also initiated a crypto-based fundraising program to bolster military resistance. 

What Does This Mean for the Future:

Crypto can serve as an evasion or an essential in war. If Russia continues using it, the West may never limit Russian aggression. If the West bans it, the Russian people will suffer. Meeting somewhere in the middle would work without causing either consequence. Perhaps this moderate take on cryptocurrency could bring peace to war.