According to Moody’s Investors Service, Russia’s capacity to use cryptocurrencies to avoid international sanctions is hampered by the cryptocurrency market’s small size. Despite rising use in small transactions, poor liquidity is another reason limiting Russians from taking use of bitcoin and other cryptocurrencies.
Western sanctions imposed on Russia for its invasion of Ukraine have generated concerns about whether Russian residents and the government can use cryptocurrencies to circumvent the limitations and conduct financial operations, according to a research published this week by Moody’s Investors Service.
The agency’s bond credit rating unit notes a recent surge in the volume of modest transactions conducted by Russians. However, the authors stated that, notwithstanding their anonymity, crypto assets are not particularly useful for avoiding financial penalties. They are adamant:
“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 points out that officials in Moscow have lately stated that Russia may accept bitcoin payments for its oil and gas exports. However, industry analysts believe that the market’s current size and lack of liquidity will damage this alternative as well.
Furthermore, crypto platforms are frequently required to comply with anti-money laundering and know your customer standards, and customers are typically checked during onboarding. According to the experts, “a centralised digital asset venue with well-established screening and compliant onboarding processes would be able to detect and delete blacklisted accounts.”
While bad actors’ illicit activities off centralised crypto exchanges or on unregulated digital asset platforms may go undetected and unreported to authorities, such activities are not currently large enough to allow sanctioned countries like the Russian Federation to avoid the restrictions, according to Moody’s.
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