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Russia Sanctions Could Be Boom For Cryptocurrency, Experts Say

Damir Mujezinovic - Author
By

Mar. 11 2022, Published 4:03 p.m. ET

Shortly after Russia invaded Ukraine, the United States and its European allies came together to impose devastating economic sanctions on Vladimir Putin's regime.

The sanctions have already harmed the Russian economy and made life difficult for ordinary Russians, especially those who rely on western services.

According to experts, this climate could be great for cryptocurrency, which exists outside the global financial system.

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The cryptocurrency market is valued at $3 trillion. Just five years ago, it was valued at $14 billion, according to Al Jazeera, which speaks volumes about how fast it has grown.

Research indicates that around 16 percent of Americans have dabbled in trading and using crypto, and now, with inflation and economic uncertainty at a record high, that number is expected to surge.

"I think we may refer to 2022 as the year of the big catalyst for crypto because what governments did is actually force adoption. They put people in a position where they had no choice but to flee to the other system," opined Ran Neuner, host of CNBC's Crypto Trader.

Impact Of Sanctions

Credit card networks Visa and Mastercard have suspended their services in Russia. The online banking giant PayPal has done the same.

Many Russian banks have been banned from using the international bank messaging system SWIFT. All of this has impacted Russian nationals around the world.

Neuner described these measures as "ridiculous" and suggested that people are effectively being forced to use crypto.

"Russians that are living in the U.S. but have bank accounts in Russia have had their credit cards cut off. Essentially, people are forced onto the alternative financial system," he said.

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Crypto Exchanges

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Cryptocurrency exchanges such as Binance and Coinbase are under pressure to ban all Russian users from their platforms -- but such bans are impossible for decentralized networks such as Bitcoin.

As Ryan Selkis, founder of crypto research firm Messari, put it, "the analogy here is Gmail versus email."

"Google could block certain addresses at the application level. But the smtp email protocol still works," Selkis said, noting that these bans might be good for China's digital yuan.

"A digital yuan could allow the Chinese Communist Party to maintain control and surveillance over all domestic transactions, but include privacy protections that make the yuan more exportable as a reserve," he explained.

Cryptocurrency Sanctions

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Democratic Sen. Elizabeth Warren of Massachusetts drafted this week a bill that would make it harder for Russians to use cryptocurrency to evade sanctions.

As reported by NBC News, both Democratic and Republican lawmakers have suggested that the government needs to crack down on crypto, so Warren's bill might have bipartisan support in the upper chamber.

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