Bitcoin’s Expansion Could Be Conditioned On Russian Demand. Thus Far, It Has Not Happened

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Due to the falling ruble and Kremlin restrictions on capital outflows, Bitcoin’s has risen in anticipation of a surge in Russian demand for the currency.

The Biden administration and other governments seeking to punish Russia for its invasion of Ukraine are increasingly concerned that Russian oligarchs, businesses, and state-sponsored organizations will use cryptocurrencies to avoid sanctions.

Several Democratic senators wrote the Treasury Department on Wednesday to learn more about the department’s efforts to “ensure sanctions compliance by the cryptocurrency industry.”

The amount of ruble purchases of bitcoin has reached a new high for the first time since May 2021. They are, however, still on the small side.

According to Citigroup, RUBLES have purchased an average of 210 Bitcoins per day over the last week. At current coin prices of $44,000, this equates to $9 million per day for the entire network.

Every day, the spot market volume of Bitcoin exceeds $5 billion. The total volume of derivatives, such as futures contracts, is in the $20-40 billion range.

According to Citi, bitcoin is owned by approximately 11% of Russians. State-owned enterprises and corporations may also benefit from the use of cryptocurrencies to avoid sanctions.

Keeping The Assets And Money Within Russia

It is possible, however, that allowing residents to convert rubles to cryptocurrencies will undermine Russia’s efforts to keep money and assets within the country.

According to reports, Russia’s central bank is requesting an outright ban on cryptocurrency use, while the Kremlin prefers trading limits for qualified investors on cryptocurrency exchanges.

Even if Russian rubles pour into crypto, it may not be enough to affect Bitcoin’s price, which has a market capitalization of $830 billion.

Citi reported this week that, excluding loan repayments, capital flight from Russia has averaged $5 billion during recent geopolitical crises. According to Citibank analysts, “significant capital flight” will be required to move the needle in crypto.

According to some experts, cryptocurrency, despite its reputation as global money, isn’t always the best option for avoiding sanctions.

“Cryptocurrencies do not yet provide the scalability to avoid financial penalties at the level of an entire economy,” writes Cornell University economist Eswar Prasad in an email to Barron’s.

According to him, cryptocurrency must be converted into fiat cash via centralized exchanges. Western governments have blacklisted digital wallets linked to Russia.

Exchanges that allow trading in those wallets risk becoming choke points for illicit cryptocurrency transactions in order to avoid being sanctioned by the US or Europe.

Consequences

Many global exchanges require customers to be screened, additional due diligence must be completed, and suspicious transaction reports must be filed in the United States. They may face consequences if they violate the rules. As a result, exchanges have a vested interest in keeping an eye on suspicious wallets.

If Bitcoin’s fails to gain traction in Russia, it may revert to being a “risk asset,” similar to equities. Since Russia’s invasion of Ukraine, there has been a distinct separation between Bitcoin and stocks, both of which have been under pressure.

Read More : Top 5 cryptocurrencies likely to explode in March; Check inside

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