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Moody’s: Cryptocurrencies Unlikely To Help Russia Evade Sanctions

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Moody’s: Cryptocurrencies Unlikely To Help Russia Evade Sanctions

Russia’s ability to employ cryptocurrencies to circumvent international sanctions is restricted by the limited size of the crypto market, according to Moody’s. Despite increased use in small transactions, low liquidity is another factor preventing Russians from exploiting the utility of bitcoin and the like.

Crypto Assets Not Viable Option for Sanctioned Russia, Moody’s Report Suggests

Western sanctions, imposed on Russia over its invasion of Ukraine, have raised questions whether Russian citizens and government can utilize cryptocurrencies to bypass the restrictions and conduct financial transactions, Moody’s Investors Service notes in a report published this week.

The agency’s bond credit rating unit highlights the recent increase in the volume of small transactions made by Russians. But the authors also say that despite their anonymous nature, crypto assets are not that useful when it comes to evading financial penalties. They insist:

Given the ruble-to-crypto market’s limited size and low liquidity, we believe that, for now, crypto assets are unlikely to provide a viable and efficient solution for individuals to circumvent sanctions.

Moody’s also recalls that officials in Moscow have recently indicated that Russia may accept payments in cryptocurrency for its oil and gas exports. However, its experts think that again the market’s current size and insufficient liquidity would undermine this option, too.

Furthermore, crypto platforms are often obliged to comply with anti-money laundering and know your customer requirements and they usually check customers during onboarding. “A centralized digital asset venue with well-established screening and compliant onboarding processes would be able to flag and disable blacklisted accounts,” the analysts point out.

While illicit activities of bad actors that occur off centralized crypto exchanges or on unregulated digital asset platforms could remain undetected and unreported to authorities, such activities are not large enough at the moment to enable sanctioned countries like the Russian Federation to avoid the restrictions Moody’s concludes.

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circumvention, Crypto, crypto assets, crypto payments, Cryptocurrencies, Cryptocurrency, evasion, invasion, Moody’s, penalties, report, restrictions, Russia, russian, Sanctions, Ukraine, War

Do you think Russia is trying to use cryptocurrencies to circumvent financial sanctions? Tell us in the comments section below.

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Lubomir Tassev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.

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Bitcoin Miners

US Sanctions Bitriver, Targets Russia’s Crypto Mining Potential

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US Sanctions Bitriver, Targets Russia’s Crypto Mining Potential

In an attempt to deny Russia opportunities to evade sanctions through cryptocurrencies, the U.S. Department of the Treasury has sanctioned leading Russian mining firm Bitriver. The move comes amid concerns that Moscow may use the minting of digital coins to monetize its energy resources.

Zug-Based Bitriver and Its Russian Subsidiaries Blacklisted by United States

The U.S. Treasury Department has for the first time taken action against Russian crypto miners that could ostensibly facilitate Moscow’s efforts to circumvent international restrictions imposed over the war in Ukraine. On Wednesday, the department’s Office of Foreign Assets Control (OFAC) designated Bitriver and a number of affiliated companies in a new round of sanctions against Russian entities and individuals.

The Treasury noted it’s specifically targeting enterprises in Russia’s crypto mining industry. “By operating vast server farms that sell virtual currency mining capacity internationally, these companies help Russia monetize its natural resources,” it said in an announcement echoing concerns expressed by the International Monetary Fund (IMF) as well.

Russia has a comparative advantage in crypto mining due to its abundant energy resources and cold climate, the department elaborated. “However, mining companies rely on imported computer equipment and fiat payments, which makes them vulnerable to sanctions,” it pointed out in a statement, further emphasizing:

The United States is committed to ensuring that no asset, no matter how complex, becomes a mechanism for the Putin regime to offset the impact of sanctions.

Bitriver is a major operator of mining datacenters which was founded in Russia in 2017. It has three Russian offices, with 200 full-time employees, and maintains a presence in several other countries, including the U.S. Last year, Bitriver transferred legal ownership of its assets to the Zug, Switzerland-based holding company Bitriver AG.

OFAC has also blacklisted 10 Russia-based subsidiaries of Bitriver AG: OOO Management Company Bitriver, OOO Bitriver Rus, OOO Everest Grup, OOO Siberskie Mineraly, OOO Tuvaasbest, OOO Torgovy Dom Asbest, OOO Bitriver-B, OOO Bitriver-K, OOO Bitriver-North, and OOO Bitriver-Turma. American citizens, residents, and entities will not be able to legally do business with them.

According to its website, Bitriver specializes in providing hosting services and turnkey solutions for large-scale crypto mining, data management, and blockchain and AI operations to institutional investors. The company brands itself as the “world’s largest hosting provider for green cryptocurrency mining” as it utilizes hydroelectric power to run its mining facilities.

Pro-Kremlin Oligarchs Hit by U.S. Sanctions

A report by Bloomberg, in late 2019, linked Bitriver’s mining center in the Siberian city of Bratsk to the energy firm En+ Group Plc and its unit United Co Rusal. Russian billionaire Oleg Deripaska used to control the two companies.

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Deripaska was sanctioned by the U.S. in 2018 for reasons related to Russia’s annexation of Crimea in 2014. The entities were also under sanctions for almost a year before the oligarch reached an agreement with the U.S. Treasury to cut his control, the article unveiled.

Source: Bitriver

OFAC has now also designated the Russian commercial bank Transkapitalbank and more than 40 individuals and entities led by another Russian oligarch, Konstantin Malofeyev. The agency claims these actors’ “primary mission is to facilitate sanctions evasion for Russian entities.”

Malofeyev is on U.S. and EU sanctions lists and wanted by Kyiv for his involvement in the war in the Donbas region. The businessman, who owns the Tsargrad media group and supports President Vladimir Putin, has been accused of financing the pro-Russian separatists in Eastern Ukraine.

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Do you expect the United States government to impose sanctions against more Russian crypto businesses? Tell us in the comments section below.

Lubomir Tassev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Bank of Russia

Bank Of Russia Rejects Idea Of Using Cryptocurrency To Circumvent Sanctions

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Bank Of Russia Rejects Idea Of Using Cryptocurrency To Circumvent Sanctions

The Central Bank of Russia has turned down a proposal to allow the use of digital currencies for the purpose of sanctions evasion. The monetary authority believes this is hardly an option as Western regulators are already taking steps to prevent such transactions.

Employing Bitcoin to Evade Sanctions Not Possible, Central Bank of Russia Says

Bank of Russia considers it impossible to use cryptocurrencies to circumvent financial restrictions imposed over the military conflict in Ukraine. That’s according to a statement by the central bank’s First Deputy Governor Ksenia Yudaeva, issued in a reply to a proposal by a member of the State Duma, the lower house of Russian parliament.

Ksenia Yudaeva

Anton Gorelkin, a lawmaker from the ruling United Russia party, had suggested that Russian companies and individual entrepreneurs should be allowed to make payments in digital currencies, including for settlements with foreign partners. He thinks the establishment of a Russian national crypto infrastructure in response to the sanctions introduced by the West is inevitable.

Central bank officials are convinced, however, that transfers of large amounts of money in cryptocurrency by Russian businesses would not be feasible. Quoted by the RIA Novosti news agency, Yudaeva pointed out that regulatory authorities in the EU, U.S., U.K., Japan, and Singapore have started to implement preventive measures.

Digital asset platforms such as crypto exchanges are also adopting restrictions amounting to denial of access to funds for Russian users, she added. And even in jurisdictions where crypto payments are not banned at the moment, authorities are setting ever higher standards for crypto service providers regarding compliance with customer identification rules.

The Central Bank of Russia (CBR) remains a strong opponent of the legalization of cryptocurrencies. In January, the financial authority proposed a blanket ban on crypto-related operations in the country. It maintains that decentralized digital currencies like bitcoin cannot be used in payments for goods and services.

With its hardline stance on the matter, the CBR has found itself in isolation among government institutions in Moscow. In February, the federal government approved a regulatory plan based on the Finance Ministry’s concept which favors regulation under strict oversight, over prohibition.

Days before the Russian army crossed the Ukrainian border, the ministry submitted a new bill “On Digital Currency” tailored to comprehensively regulate the country’s crypto market. In mid-March, another Russian lawmaker working on the upcoming crypto regulations, Alexander Yakubovsky, suggested that cryptocurrencies could help Russia restore its access to global finances.

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Bank of Russia, CBR, Central Bank, circumvention, conflict, Crypto, Cryptocurrencies, Cryptocurrency, deputy governor, Digital Assets, Digital Currencies, evasion, invasion, lawmaker, restrictions, Russia, russian, Sanctions, State Duma, Ukraine, War

Do you expect Bank of Russia to change its attitude towards cryptocurrencies if Western sanctions continue to expand? Share your thoughts on the subject in the comments section below.

Lubomir Tassev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.

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Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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