The US has imposed a number of economic sanctions on Russia over the last few years as a form of retaliation against perceived disruptive activity on the world stage.
Because of these sanctions, cryptocurrency has emerged as a useful solution for Russia to get around the issue of trade restrictions.
Iran, North Korea, Russia, and Venezuela are all investing in cryptocurrencies in an attempt to counter US economic might.
US sanctions work by placing bans on dealings and transactions with persons, nations, and companies.
These prohibitions are often enforced with the help of mainstream financial institutions.
But cryptocurrencies do not operate within this established system and so can be used by nation states to transact freely outside of the international banking network.
Why has the US imposed sanctions on Russia?
Russia has been under pressure from US sanctions due to its alleged involvement in a number of provocative incidents over the last five years.
Russia was embroiled in the Crimea crisis in 2015 before providing support for the Syrian government in the recent civil war that has ravaged the country.
The US has also accused Russia of damaging cyberattacks and even meddling in the recent US presidential election.
Innocent Russian citizens suffer from the US sanctions, and the Russian government does not want to be dependent on the United States. The country wants to develop its own economy by driving local production and supporting businesses and agriculture.
While the Russian government understands that cryptocurrency can be the solution to this problem, it has still been very slow to accept official regulation.
How cryptocurrency can help Russia
Cryptocurrency is a great way to transfer money around the world and can bypass official financial institutions.
After the US disconnected Russia from the globally accepted SWIFT banking network, the government started work developing a national cryptocurrency referred to as the CryptoRuble to avoid being financially cut off from the rest of the world.
It is understood that Vladimir Putin himself has ordered teams of experts to create a cryptocurrency that will allow the Russian leader to bypass international sanctions and keep many of his country’s huge intercontinental transactions under the radar.
Currently, Crimea is suffering the most from US sanctions. Visa and Mastercard both temporarily stopped working in this region, causing a significant financial crisis. The ability to transact freely with cryptocurrencies in this region will therefore greatly help citizens and businesses.
While it would improve the overall financial situation, even if Russia introduces cryptocurrency in the near future, the country will not be able to avoid US sanctions entirely.
The Office of Foreign Assets Control (OFAC) uses a very simple sanction mechanism whereby all companies and persons on the sanctions list are not allowed to conduct business with foreign financial institutions and receive assistance from them.
Today, it does not matter what kind of money (fiat or crypto) countries under sanctions use, as everyone who cooperates with them will be subjected to harsh repercussions by the US.
You can read more about the CryptoRuble here.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.