Due to the war in Ukraine, cryptocurrencies are under scrutiny. The European Union and the United States fear that Russian oligarchs are using cryptocurrencies as a route to circumvent sanctions. This fear also lives in Ukraine. Ukraine’s deputy prime minister called on crypto exchanges to ban Russians altogether. Do cryptocurrencies offer a way out for Russia, and if so, should we better regulate cryptocurrencies? Or should we impose an outright ban?
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If Russia tries to evade sanctions through cryptocurrencies, it will not go unnoticed, says BNR tech expert Herbert Blankesteijn on BNR Podcast De Nieuwe Wereld. ‘A private individual could do that quite easily, but if a country is going to transact in crypto, you’re talking maybe billions a day. Then it will become visible in the market.’ According to Blankesteijn, an oligarch, on the other hand, might be reasonably able to secure money through crypto.
Still, concerns about crypto as a tool to avoid sanctions are overblown, says ING Digital Finance & Innovation Chief Economist Teunis Brosens. The sanctions are not aimed at all Russians, but very specifically at certain companies and oligarchs who are no longer allowed to transact. Crypto companies also have those lists of companies and oligarchs, and they say they enforce them. If they don’t, they are simply breaking the law and can be dealt with accordingly,” says Brosens.
Intangibility of cryptocurrencies
It is not surprising that there is fear, according to Brosens. “There is a general notion that cryptocurrencies are elusive. Furthermore, cryptocurrency companies are not always based in Europe or the US, but are also often located on far away islands in the ocean or in other places that do not follow the same policies as Europe and the US in terms of regulation and sanctions. So I think there’s also a fear that cryptocurrency will find a way to move around Europe and the US. But that’s not so much a crypto-specific issue, it’s just an issue that the safety net of sanctions is not comprehensive. .
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Crypto Donations Ukraine
Cryptocurrency is also used in Ukraine. “We see that the Ukrainians have been very creative in opening all the crypto registries in the last few weeks. There has been a call from the Ukrainian government to make donations in cryptocurrency. The latest position is over $100 million, which has come in crypto.”
He continues: “It is one more step in the maturation of the crypto market. It’s not just a game or a joke, the Ukrainian government uses it and it also works to facilitate the transfer of money across borders.’
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Not only in a war situation, an alternative payment system such as cryptocurrencies is always interesting, adds Martijn Jeroen van der Linden, Professor of New Finance at The Hague University of Applied Sciences. Van der Linden is against an outright ban on cryptocurrencies. ‘The thing to keep in mind with the world of cryptocurrencies is the difference between countries where the financial or monetary infrastructure is very well developed and countries where it is less so. You have seen for a long time in countries like Venezuela, but also in African countries, that people use cryptos for very different purposes than we use them for.’
“I understand that there is extra pressure and that something new is exciting, but I think we should not forget that many other things can also be used to circumvent sanctions. It is better to find out if the sanctions are implemented correctly in the countries and for the people to those that apply, than penalize cryptocurrencies as a whole.”
Innovations in cryptoland
Brosens agrees. “I think such a call for a ban is a shame. So many interesting things are happening in the land of cryptocurrencies, like many innovations. Banning that would kill you, and that’s a shame.
But he says he goes one step further. You would kill him in Europe. What I would see with a complete ban is that from now on all crypto business will take place outside the EU borders, so we will lose a dynamic sector fast. You can also throw away the whole supervisory framework, which is now being worked on very hard in Europe, because if you introduce a ban, you know that all the crypto companies are moving out of the border. And then European supervision no longer serves you.
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