Russia is using cryptocurrencies in a bid to evade sanctions put in place as a result of its invasion of Ukraine.
The UK, EU, and USA have all imposed sanctions against Russia following the invasion, including the sanctioning of individuals.
The EU has frozen some €21.5 billion (just over £19 billion) of assets, while also blocking around €300 billion (just over £266 billion) worth of assets from the Russian Central Bank in the G7 and EU.
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Russia has already employed a number of tricks in various bids to evade the financial restrictions, which have been imposed, such as trading in rubles rather than dollars and even making exchanges between ships in international waters.
Now, the country has started employing cryptocurrencies in a bid to avoid financial sanctions.
While large cryptocurrencies such as Bitcoin do have security measures in place, other forms of cryptocurrencies are difficult to trace and to regulate
This makes them a useful tool in laundering money from criminal activity or for paying for illegal or restricted goods.
While hard cash is still far more prevalent for criminal activity, cryptocurrencies can be a useful tool for people looking to move around illegal money without needing to have vast piles of cash lying around.
Crypto is currently illegal in Russia, however a special measure is being introduced which would create state sponsored crypto mines.
These mines would be huge computer servers which would effectively monitor and legitimise Bitcoin transactions and are rewarded with bitcoin as a result.
Crucially, it doesn’t require the investor to actually purchase any Bitcoin at the start of their investment.
Russia will also allow the use of cryptocurrency during certain transactions, with all of this being heavily monitored.
Elvira Nabiullina, the head of the Central Bank of Russia, said: “Adhering to the policy that cryptocurrency should not be used within the country, we propose to allow it as an experimental measure.
“The relevant bill is also being prepared to introduce an experimental legal regime.”
Russia will establish bodies dedicated to supervising the mining of crypto, as well as monitoring crypto transactions outside of Russia.
However, Russia has also indicated that this apparent relaxation on cryptocurrency will only apply to transnational transactions.
The position on using cryptocurrency within Russia has not changed, with it remaining illegal for use in transactions only within Russia.
The US has blocked Russian Central Bank from using dollars in its transactions, a problem for Russia as the dollar is still largely seen as the currency of international exchange despite Russia and China looking to shift away from the US dollar.
Cryptocurrency could be a way for Russia to circumvent some of the restrictions imposed on it since its invasion of Ukraine.
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