Cryptos, CBDCs Are Sanctions-Resistant, Can’t Help Russia For Now
Contrary to the view shared in some quarters, a fintech expert and the author of ‘Cashless’, a book on China’s digital currency revolution, Richard Turrin, has ruled it out that Russia could use cryptocurrency and central bank digital currencies (CBDCs) to avoid sanctions following its invasion of Ukraine. Though some analysts suggest the need to expect a mutual Russia-China collaboration in this regard, Turrin, who has been following the development, particularly from the Chinese perspective, thinks turning to cryptocurrency and CBDCs like the digital yuan (e-CNY) won’t help – at least for now – as they are sanction-resistant.
“When we think about sanctions, we really think about SWIFT which is the major money-moving system on the planet,” he said as he talked to CGTN about how the technology behind cryptocurrency and CBDC has now made it possible to build a new digital cash transmission system. “What they allow us to do is to move money from one place to another without ever touching the SWIFT system.”
A lot has changed in the Russian economy since the sanctions were imposed – including some of the country’s banks being excluded from the SWIFT arrangement – by the U.S., Japan and other Western nations. Aside from the country’s currency, roubles, which has reportedly lost nearly 50% of its value against the dollar since the start of 2022, many multinational companies have exited Russia even as the extent of the eventual impact of their leaving is too early to be determined as yet.
Russian banks’ disconnection from SWIFT had been speculated to benefit China’s cross-border payment system and accelerate its e-CNY development. This is probably a result of an ongoing independent trade network that China and Russia had earlier announced they were working on or the cross border use of the e-CNY that is somewhat edging closer to Russia through China’s closest province, Heilongjiang.
The suggestions that Russians may want to use cryptocurrencies like Bitcoin to avoid the impact of sanctions are likely connected to the country’s involvement in the industry. Russia has one of the highest numbers of cryptocurrency users and is one of the world’s leaders in terms of cryptocurrency mining capacity, according to a report by the country’s central bank earlier this year. The paper cites estimates of transactions with cryptocurrencies by Russians to be about $5 billion a year.
Fact: there are about 350 banks in Russia. Only about a dozen are on the sanction list.
And everyone's focused on crypto. 🤷♂️
(ps, none of them work with crypto exchanges)
— CZ 🔶 Binance (@cz_binance) March 7, 2022
Meanwhile, as Turrin ruled out cryptocurrency, he suggests that sanctions could be circumvented in the long term using CBDCs. “I’m sure that people who are working at Russia’s central bank are working overnight and overtime to try to get this put. But the reality is, it’s still months away. It will not help Russia in the near two to three months horizon. We are looking at three to six months perhaps they can get something out.”
He added that the issuing of CBDCs, particularly in the Asia region, is throwing a challenge at SWIFT as the main system for moving money. He said: “We are looking at what is essentially a competitor to SWIFT. SWIFT is a very innovative company…They’re going to try to be important in the central bank digital currency world. But the big question is: will users of central bank digital currencies accept the sanctions that traditionally come with the SWIFT system? Most people in the business think that central bank digital currency users want a free and open system. They want to transact with whom they wish to transact without sanctions.”