Bitcoin’s Surprising Role in Russia Crisis

The full force of the West’s economic sanctions did not appear to dissuade Russian President Vladimir Putin from launching a large-scale invasion of Ukraine. 

The surprising “get-out-of-jail-free” card has been Russia’s surging adoption of cryptocurrencies, like Bitcoin. Crypto market watchers say that crypto mining and investment from the Eastern European bloc has skyrocketed in the past two years, and the region is now estimated to account for as much as 15% of all crypto value.

Sanctions imposed by the US and EU rely on banks to enforce the rules. It is the job of the bank to freeze accounts and monitor the financial affairs of sanctioned individuals. However, digital currencies operate outside the realm of the traditional banking system. Analysts are saying that Russia can effectively evade the full force of sanctions by, for example, procuring energy in Bitcoin from countries like Iran.

Other analysts warn it will not be that simple, as cryptos cannot support large, country-level purchases, and even items like food stores still must be purchased in fiat currencies. Likewise, the oil trade, a major part of Russia’s economy, is denominated in US dollars. 

What does this mean for me? 

In this fascinating turn of events, crypto investors can see in real time how the new payment form is starting to take up a more prominent role in world affairs. For crypto traders concerned about the short-term volatility of the market, there are many signs that it is here to stay despite its wide daily price swings.