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Cryptocurrencies and sanctions in the spotlight

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A key topic during the conference was cryptocurrency like bitcoin. Russia’s invasion of Ukraine• The enactment of sanctions, and any subsequent turmoil in the financial market.

It has raised three major questions about its use and future.

Are cryptos able to be used for sanctions avoidance?

Russia’s invasion of Ukraine has resulted in a variety of economic sanctions that aim to isolate the country from the world financial system.

Russian key figures and financial institutions were placed on notice U.S. sanctions listThe ban effectively prevents American businesses from conducting business with Russia. Both the United States and Canada removed important Russian banks from their respective countries. interbank messaging system called SWIFTTheir access to the global financial market is restricted.

Sanctions have been caused the Russian ruble to plunge.

It has sparked a discussion about whether cryptocurrency, particularly bitcoin, can be used to bypass restrictions for people on sanction lists.

It’s because digital currencies such as bitcoin are sometimes decentralized. This means they are not controlled or issued by any central authority like a bank. It does not follow the financial pipes when crypto is sent out to users.

However, there are several challenges.

The first is that blockchain technology, which underpins Bitcoin, acts as a public record of all activity. You can track funds moving from one account into another easily. However, this doesn’t make it an effective tool to prevent sanctions.

CNBC spoke with Vijay Ayyar who is vice president for corporate development at Luno and an international crypto exchange executive. He stated that “the biggest misconception regarding crypto is it is not traceable and is used primarily to commit nefarious acts.”

Russian oligarchs, and other companies don’t have enough liquidity at the moment to be able to move their cash around.

Ayyar explained that “liquidity in crypto remains a fraction” of the world’s currency market and therefore it is challenging to transfer large amounts of money via crypto.

Also, cryptocurrency exchanges are on alert.

“Exchanges that operate with strong processes and codes of conduct will no doubt be doubly watchful at this moment for funds that have nefarious origins,” Charles Hayter, CEO of data firm CryptoCompare, told CNBC.

Brian Armstrong (CEO of Coinbase cryptocurrency exchange/wallet) supported many points with a thread. According to him, every U.S. company must follow the law.

No matter how much your company has in USD, Crypto, Gold, Real Estate, or any other non-financial assets, it doesn’t make a difference. Armstrong explained that sanctions laws are applicable to US individuals and businesses.

It would be wrong to assume that crypto-businesses like Coinbase will not follow the law. We will. We screen all people that sign up to our services and check them against global watchlists.

According to CryptoCompare, however, transactions have increased from the ruble to bitcoin and to tether (a stablecoin that is tied to the U.S. dollars) since Russia’s attack against Ukraine. Hayter stated that this was a flight to the U.S. dollar “by any means possible” since the ruble plunged.

Armstrong of Coinbase said, “Some ordinary Russians are turning to crypto for a means of survival now that their currency is insolvent.”

Senator Elizabeth Warren and other lawmakers urged the Treasury Department earlier this week to make sure that crypto-compliant companies comply with Russian sanctions. According to one official from the United States, it is unlikely Russia will use cryptocurrency to avoid sanctions.

“The Russian State would have to overcome all U.S. financial sanctions and those of its partners on a massive scale, so cryptocurrency would be almost certain not be an effective primary tool for it,” Carol House (director of cybersecurity, National Security Council) said in a Wednesday webinar. Reuters reported.

Bitcoin is becoming the ‘digital Gold’ of today?

The digital currency has been called “digital Gold” by bitcoin supporters for many years. It is thought that bitcoin could act as a currency store and be used in times when there is turmoil.

However, the theory is now proving to be incorrect. bitcoin trading has been correlated to risk assetsStocks, especially.

However, as tensions in Ukraine escalated this week, bitcoin experienced a massive one-day jump, taking it to $44,000 above its lows for 2018. This led to speculation about the possibility that the cryptocurrency could be regaining some of its previous gains. time as a safe haven asset has come.

Several experts disagreed.

We have seen a number of publications about BTC gaining the status of a safe-haven. “We completely disagree with that notion,” Lux Thiagarajah (head of trading account management and trading at the crypto financial services firm BCB Group) stated in a Thursday note.

A safe haven asset is one that does not lose its value in times of market turmoil. The Fed (U.S. Federal Reserve), which was expected to increase rates sooner than they had anticipated, has seen crypto sell off aggressively. Stocks have also been selling off. This is not the definition for a “safe haven”.

Luno’s Ayyar claimed that in the last week bitcoin had “de-correlated quite substantially from equities & gold, which was one positive indication about its use case for a safe haven.” While he said that bitcoin would continue to mature and take away market share, that story “may still be more complicated to unfold.”

Is blockchain technology proving its worth?

Proponents of cryptocurrency often boast the benefits. underlying blockchainIt allows for more transparent and efficient transactions. The reason is because there’s no middleman to transfer the money unlike other financial transactions.

However, many cryptocurrencies are still subject to high fees and slow transactions. For things such as payments, they haven’t seen widespread acceptance.

But, the war ended during this time. Ukraine began to accept donations via cryptocurrenciesThere are many other ways that the country can fund its military. According to Elliptic, Ukraine raised more than $50 million through cryptocurrencies.

It might prove difficult to receive donations using traditional banking methods due to the high costs of sending money abroad. Ukraine may take some time to get the money.

According to Garrick Hileman (visiting fellow at London School of Economics), this is where cryptocurrency has an advantage.

If critical infrastructure fails or concerns arise about the speed at which something may get through traditional banks, you will be able to transact as long as there is internet access and a computer. Hileman stated that this was one of the promises made by crypto.

Hileman stated that you are able to view the transaction logs and see how the money was used after being received.

He said that some of the original value propositions for cryptocurrencies have been validated.

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