Three Reasons Why Vladimir Putin and Russian Oligarchs Will Not Be Able To Avoid US Sanctions

The past few days have demonstrated that, in the face of economic and financial sanctions impacting their nation, Russian residents regard Bitcoin as a critical safe haven for their hard-earned money. Bitcoin trade volumes have soared, and this has had a huge impact on Bitcoin's price, which increased by 20% in 24 hours earlier this week.

That was all it took for us to hear voices suggesting that the United States and the European Union needed to step up their efforts to prevent Russia from evading economic and financial sanctions by utilizing Bitcoin and other cryptocurrencies.

Hilary Clinton has recently urged Joe Biden to do so, while Christine Lagarde recently stated that the European Union needs to expedite legislation to get weapons to freeze bitcoin assets on targeted people's trading platforms.

While research indicates that Russians use Bitcoin as a safe haven, there is a world of difference between that use and what politicians are now condemning. Don't get your hopes up, as I mentioned a few days ago: Putin isn't preparing to go all-in on Bitcoin.

I'll explain why in three parts.

• 1. In any media, American corporations are no longer allowed to trade with Russians on the SDN List.

The bulk of Russian banks will lose access to the SWIFT interbank network, according to all media reports in the previous few days. Many individuals believe that using a different exchange system will suffice for Russia to avoid American sanctions.

This is based on a misunderstanding of the true nature of the American penalties against high-ranking Russian officials, which were just announced. It all starts with President Joe Biden signing an executive order allowing the Office of Foreign Assets Control (OFAC) to designate particular targets for US sanctions, including persons, businesses, countries, and other entities.

These individuals are added to the Designated Nationals and Blocked Persons (SDN) List by OFAC. Details may be found here:

The list of Russian persons or entities that have recently been added to this list may be found here. The crux of the sanctions is that anybody on this list can no longer do business in the United States. There are no longer any options to purchase American goods or services, offer items in American markets, or own property in the US,...

Americans who do business with people or companies on the SDN list face harsh penalties. At this level, there is no room for error.

om these measures, the United States has chosen to freeze the assets of Russian oligarchs as well as the Russian Central Bank. This is on top of the bulk of Russian banks being kicked out of SWIFT.

While it may appear enticing to bypass SWIFT by using a worldwide P2P payment system like Bitcoin, whose transactions cannot be controlled, this does not remove the initial restriction. Individuals or businesses included to the SDN list are not allowed to trade with US entities. This is true regardless of the form of currency used: gold, dollars, euros, etc., and hence Bitcoin other cryptocurrencies.

Russian banks can continue to perform transactions, but without SWIFT, they will be more complicated, and they will not be in US dollars with US organizations or persons. At this level, Russia will be more interested in a system that it can control than an open and transparent system like Bitcoin. It has its own SPFS system, which may be linked to China's CIPS system sooner than anticipated.

Russia, which has been expelled from the international monetary and financial system, will instead turn to China. Bitcoin is not a threat that warrants American interference, and the US authorities are perfectly aware of what I've just said.

• 2. The Bitcoin market, as well as the cryptocurrency sector in general, is insufficient to salvage the Russian economy.

The market capitalization of Bitcoin is presently $828 billion dollars, while the total market capitalization of all cryptocurrencies is $1.9 trillion dollars. This is already important, but it is little in comparison to the Russian economy's demands for survival. BTC - Ruble pairings don't have much value. Liquidity is insufficient. Furthermore, Bitcoin is too pricey for the Russian economy's demands. Finally, the Bitcoin network's openness prohibits it from being utilized to assist Russia avoid US sanctions.

The Russian people can secure themselves with Bitcoin and cryptocurrencies, but their demands are insignificant in comparison to the Russian economy's. The American and European sanctions, on the other hand, are directed against Vladimir Putin's government rather than the Russian people. As a result, it is not a problem for individuals to exchange their rubles for Bitcoin. It is something that will further destabilize the Russian economy. There is no need to be concerned.

• 3. For years, Vladimir Putin has been planning his strategy, and Bitcoin was never a part of it.

For years, Vladimir Putin has been planning his strategy. By deleveraging Russia year after year and amassing vast currency reserves, Putin has erected a fortress around the country. At the core of his strategy is a clear intention to lessen Russia's reliance on the US currency in favor of gold and the yuan, which make up 17% of the central bank's reserves. This is a major difference from other central banks, where the yuan only goes up to 3%.

Putin has also shifted Russia's economy to Asia, but not through prioritizing Blockchain. He has also attempted, with varying degrees of success, to make the country self-sufficient in many sectors.

Bitcoin and cryptocurrencies were never a priority in any of these strategies. Putin didn't appear to believe it was a good idea to keep the Bitcoin option open until the beginning of this year 2022. It's too late to prepare for it to become a favored option.

As a result, Putin's Russia will turn to China and Asia to attempt to evade American and European sanctions as much as possible. Because the Russian economy is already on the verge of collapse, this will be extremely tough.

Last Thoughts

Some politicians and central bankers will try to use the present Ukraine-Russia situation to highlight the hazards of Bitcoin and cryptocurrencies. They will, in fact, seek legislation to better govern this ecology.

However, don't be fooled by all the commotion. Bitcoin and cryptocurrencies will only be utilized on the periphery by Russians, while Putin and the Russian billionaires will have to choose other options to shield themselves from Western sanctions.

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