When Canadian Prime Minister, Justin Trudeau, announced the enactment of various emergency powers in response to a protest taking place in Ottawa, there was a decidedly mixed reaction among the public. Much of this was due to the Governments decision to implement various financial sanctions against parties responsible for organizing the protest. For many, these sanctions were a wake-up call, as they highlighted the woeful levels of financial freedom given to most. In search of alternatives to the now hostile banking system, many turned to cryptocurrencies as a means to transfer value, eliminating the need for various intermediaries. While the government attempted to limit the use of cryptocurrencies for this purpose, there is no way to do so entirely.
Due to the on-going invasion involving Ukraine, Russia, and Belarus, these aforementioned events now seem trivial to some, and in a distance past. It is interesting to see though, that despite the nature of these events differing entirely, there is a shared defensive tactic between the two – financial sanctions.
A ‘SWIFT’ Removal
In an attempt to aid Ukraine and thwart Russia’s advance in to the region, various world powers have called for the latters removal from the SWIFT banking system. The purpose of this move is to temporarily cripple Russia’s ability to fund its invasion efforts, and to put financial pressure on those responsible.
As it stands, various Russian banks have already been removed. This was announced in a recent statement from the following,
- European Union
- United Kingdom
- United States
In the time since, there have been early signs of effectiveness, with the Russian Ruble declining sharply, and the Russian Central Bank being forced to
Will Exchanges Aid in the Effort?
With a goal in line with cutting Russia out of the SWIFT system, Ukrainian Vice Prime Minister, Mykhailo Fedorov, has now asked for digital asset exchanges to restrict services of users with ties to Russia.
While not all have been swayed to do so, the world’s largest digital asset exchange, Binance, has decided to do its part. The company recently stated to Reuters that it would be, ‘…blocking accounts of those on the sanctions list (if they have Binance accounts) and ensuring that all sanctions are met in full’.
Despite much of crypto being founded on a strong set of ideologies – which take financial empowerment in to account – centralized exchanges find themselves in a difficult position. Requests for sanctions can be ignored in the name of empowerment, or governments can be assisted in attempting to financially cripple strategic targets. With much of the growth seen in recent years surrounding the digital asset sector being made possible through cooperation with governments around the world, many do not see it as simple choice. If exchanges want to avoid a crackdown on their own industry, perhaps cooperation is the more attractive solution -highlighting the ways in which digital assets can be used for good.
With financial sanctions in place and being requested, what has the response been? While Governments may be able to enforce the removal of Russia from the worlds SWIFT system, restricting access to crypto is not so simple (despite Binance announcing that it will work to do so).
However, many believe that these attempts are futile in nature. With regards to digital assets, many believe that the advent of decentralized exchanges, mixing services, etc., will allow for Russia to easily circumvent any impositions.
This potential for circumvention has not gone unnoticed though, with the US Treasury stating in that past that digital assets could, ‘potentially reduce the efficacy of American sanctions’.
Help from Different Avenues
Restricting access to finances is not the only way the digital asset sector is playing a role in this event. Rather than solely being leveraged to punish Russia, these same assets are being used to fund Ukraine’s defensive efforts.
At time of writing, it is believed that well in excess of $20 million worth of digital assets have been donated to the Ukrainian government. Of this, $10 million has already been spent to purchase supplies supporting defensive efforts.
For ‘Good’ or ‘Bad’
As can be gleaned from the aforementioned events, it is important to realize that cryptocurrencies can be used to do both good and bad in this world. How the events play out, surrounding the on-going invasion, may provide insight in to which is more effective.
Which will prove to be a more effective use of digital assets – Russia potentially circumventing sanctions through the use of cryptocurrencies? Or Ukraine through donation of financial aid through cryptocurrencies?
Ukraine has already benefitted from the donation of millions through digital assets. Time will tell just how effective these sanctions being imposed upon strategic Russians will be.