Cryptocurrencies to circumvent sanctions? They US in the attack of the Russian BitRiver

There are fears that Moscow could exploit its vast natural reserves to mine with the aim of gathering resources and thus bypassing Western restrictions. The bitcoin company will no longer be able to access US exchanges

22 Apr 2022

Veronica Balocco

The US Treasury Department's Office of Foreign Assets Control (Ofac) fears that Russia could leverage its vast reserves of oil and other natural resources to mine energy-intensive cryptocurrencies as a way to raise funds and circumvent sanctions. westerners. This is the reason why the latest round of sanctions targeted the multibillion-dollar Russian crypto sector: in the center, the bitcoin mining company BitRiver. The sanctions, in particular, will cripple the company and its various subsidiaries, preventing them from accessing U.S. crypto exchanges or mining equipment.

"Ofac will use all the tools in its arsenal to prevent Russia from evading sanctions through cryptocurrencies," David Carlisle, vice president of political and regulatory affairs at cryptocurrency compliance firm Elliptic, said in an email note.. In particular, cryptocurrency mining, while in no way a substitute for assets frozen by Russian sanctions, avoids fiat-to-crypto 'on-ramps' and crypto-to-fiat 'off-ramps' in particular, according to experts. centralized exchanges of virtual currency, thus bypassing sanctions screening.

Index of topics

• An international concern

• Third largest bitcoin mining hub

An international concern

The move shows that US officials are deeply concerned that Russia could leverage its natural resources to conduct cryptocurrency mining to evade sanctions, something Iran and North Korea are known to have done in the past. The potential exploitation of bitcoin production to evade Russian sanctions remains a key concern for global regulators, including the International Monetary Fund.

Meanwhile, Binance, the world's largest cryptocurrency exchange, said it is limiting its service to Russian users in response to the fifth wave of EU sanctions against Moscow. Russian Binance accounts with more than € 10,000 in digital currency will be barred from making deposits or exchanges and will only be able to withdraw funds, the company said.

"While these measures are potentially restrictive for ordinary Russian citizens, Binance must continue to lead the industry in implementing these sanctions," the exchange said in an update on its website. "We believe all other major exchanges should soon follow the same rules."

Russia is home to a huge cryptocurrency market. The Kremlin estimates that the Russians have around 10 trillion rubles ($ 124 billion) of digital assets. It is unclear where this data came from, but there is mounting evidence that Russians are turning to cryptocurrencies as an alternative to the ruble as the currency collapses in response to the country's economic isolation.

Third largest bitcoin mining hub

Meanwhile, data from the University of Cambridge show that Russia is a powerhouse in the field of cryptocurrency mining. According to the Cambridge center for alternative finance, in August 2021 the country accounted for about 11% of the global processing power used to mint new units of bitcoin, making it the third largest mining hub behind Kazakhstan. Given that Kazakhstan's political unrest has led to the taking offline of bitcoin miners, there is a possibility that Russia's share in the sector may be even higher now.

However, the Russian government has a "love-hate relationship" with digital assets. While the Russian central bank is pushing for a ban on the use and mining of cryptocurrencies, President Vladimir Putin wants to regulate them instead.

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