Banking Briefing: Can Russia use crypto to get past sanctions?
- There’s been a lot of concerns about Russia using crypto to get past sanctions.
- But it turns out that using crypto to make up for lost revenue may not be so easy.

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As the US and allies tighten sanctions against Russia, many experts have voiced concerns that crypto could be a way for Russia to bypass these penalties.
For sanctions to really work, the global financial system needs to play a role. Banks are able to provide the government insight about where money is coming from and where it’s going. But as an article by the New York Times puts it –
“…if banks are the eyes and ears of governments in this space, the explosion of digital currencies is blinding them.”
Crypto exchanges still aren’t as good as banks at tracking funds. Meanwhile, crypto remains largely uncharted territory for officials.
And regulatory clumsiness could give Russia a foot in the door to make up for lost revenue. In 2021, 74% of the money stolen through ransomware attacks went to Russia-linked hackers. Hacking techniques like these could aid the country in stealing digital assets.
Then there’s the digital ruble – Russia’s own central bank digital currency, which it’s been developing. Russia’s goal is to use digital ruble to trade with countries that agree not to first convert the currency into dollars.
Finally, while most cryptocurrency transactions are recorded via underlying blockchain technology, Russia’s been building new tools that could help mask the origin of these transactions, making it easier for businesses to trade with the country.
On the other hand...
The crypto industry is still in puberty in a lot of ways. For example, it’s not nearly as efficient as the SWIFT messaging system, according to Richard Miller, market researcher at TipRanks.
“Bitcoin and Ethereum require high amounts of energy to transact and are dramatically less efficient than the SWIFT messaging system now inaccessible to many Russian banks,” said Miller. “As a result of the sanctions, the Russian Ruble has plummeted several days in a row and Russian citizens are left making a run-on banks. The Kremlin’s foreign currency reserve assets have been frozen, and would need implausible amounts of crypto to replace its power."
Another thing Miller mentions is that there have been reports that Russia is paying around 40 to 50 percent more per bitcoin, making its own currency even less valuable, “so while the crypto market may provide a temporary reprieve to some, it is certainly not a long-term solution.”
Still, authorities may be recognizing the potential crypto has for Russia.
This month, Biden signed an executive order pushing for the Federal Reserve to look into whether or not the Central Bank should start working toward creating its own cryptocurrency. The move comes as lawmakers and administration officials continue to voice concerns about the potential benefits crypto could have for Russia.
An expert’s take on the sanctions against Russia and what they mean for the financial industry
Salvatore LaScala is a partner and the head of global investigations and compliance practice for consulting firm Guidehouse. For this week’s briefing, LaScala joins Tearsheet to discuss the impact of sanctions against Russia on the Russian economy and how financial firms across the globe should respond.
Summary of the current sanctions
“Following Russia’s ongoing invasion of Ukraine, the US, EU, UK, and their allies imposed heavy financial and trade sanctions targeting key sectors of the Russian economy along with numerous individuals and entities close to Vladimir Putin.
The wide-ranging sanctions and prohibitions include:
- Restrictions on financial transactions involving the Russian Central Bank, the National Wealth Fund, and the Ministry of Finance in U.S. Dollar, Pound Sterling, and Euro, effectively restricting access to much of Russia’s foreign currency reserves
- Designations of key Russian financial institutions, including a prohibition on establishing or continuing correspondent banking relationships, and the implementation of asset freezes abroad
- Removal of several Russian and Belarusian FIs from the SWIFT network, a major global financial messaging system
- Expanded debt and equity prohibitions restricting Russia’s ability to raise new capital
- Sanctions against major Russian defense companies, and additional export controls targeting Russia’s defense, aerospace, and maritime sectors
- Sanctions against Belarusian banks, entities, and individuals, as well as expanded export controls targeting Belarus
The new and evolving sanctions – alongside measures imposed by traditionally neutral parties such as Switzerland – show that a consistent and coordinated approach can threaten the stability of the Russian economy, and can result in a substantial political, economic and social burden on Russia and the separatist regions.”
What's ahead
“The resolve of NATO and its allies in the face of Russia’s invasion of Ukraine shows no sign of abating. Despite initial reluctance by many nations – particularly in Europe – over the impact of sanctions on their own economies, public pressure has resulted in an unprecedented global sanctions effort against Russia that effectively puts a stranglehold on its economy.
The US and UK bans on Russian oil imports and additional sanctions against more than 100 individuals and entities are expected to further compound Russia’s troubles. In addition, the proposed UK bill aimed at rooting out ill-gotten money from the British economy will strengthen British authorities’ efforts to pursue Vladimir Putin’s allies located in the UK.
Moreover, statements following a recent meeting of ministers of foreign affairs of G-7 nations suggest additional sanctions on the Russian government and economy, another signal of collective resolve against Russia’s actions, short of military intervention. As the sanctions against Russia come into force globally, the next few weeks will demonstrate the true impact of the restrictions on the Russian economy and the country’s ability to withstand its growing exclusion from global markets.”
How financial institutions should respond
“FIs will need to rapidly review their sanctions compliance programs to identify any gaps or weaknesses resulting from the enhanced sanctions on Russia. On top of that, they should also identify the necessary updates to sanctions lists and screening efforts for newly designated Russian individuals and parties, and further evaluate customer relationships with potentially direct or indirect exposure to Russia.
In addition, FIs should look in-depth into all policies and procedures, training initiatives, systems and controls that are relied on to ensure sanctions compliance.
Finally, they need to assess the reputational risk that comes with any permissible transaction exposure to Russia, or to companies that continue to operate there.”
What we’re reading
How financial institutions are interconnected with Russia (Forbes)
78% of Americans say they prefer to bank digitally (Forbes Advisor)
No-nos to keep in mind with banking-as-a-service (The Financial Brand)
Russia owes western banks $120 billion (CNN)
Sifted asks Gen Zers directly what they want from their banks (Sifted)
Acorns raises $300 million (Crunchbase)
Q&A with Dave CEO: standing out as a challenger bank and the name ‘Dave’ (eMarketer)
Challenger bank Lunar launches crypto trading platform (TechCrunch)
JPMorgan Chase, Goldman Sachs, and now Deutsche are all backing out of Russia. The move will take time, though (Reuters)
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