With sanctions from the US and other nations targeting Russia’s banking system and the possibility of being excluded from the SWIFT payments network, there could be a pivot for Bitcoin and crypto assets.
On February 24, US President Joe Biden promised a wave of sanctions on Russian banks and financial institutions. He said that after speaking with G7 leaders, there was complete agreement on a concerted effort to exclude Russia from the global economy by limiting its access to major currencies.
“We will limit Russia’s ability to do business in dollars, euros, pounds and yen to be part of the global economy. We’re going to limit their ability to do that.”
In addition to the sanctions, the country’s exclusion from the SWIFT payment network is also being considered. This will limit the ability to transfer funds to Russian banks from abroad.
British Prime Minister Boris Johnson pressed “very much” for Russia to be removed from SWIFT while Ukraine’s Foreign Minister Dmytro Kuleba tweeted:
“Everyone who now doubts whether Russia should be banned from Swift has to understand that the blood of innocent Ukrainian men, women and children will also be on their hands. BAN RUSSIA FROM SWIFT.”
Pivot to Bitcoin
SWIFT is a Belgian organization used by more than 11,000 banks and financial institutions worldwide, processing around 42 million messages a day. It has been criticized recently for being a slow, expensive and outdated money transfer mode, however it remains the industry standard.
There are concerns that banning Russia from the global payments network will bring them closer to China in developing their own system.
The adoption of cryptocurrencies like Bitcoin would be ready to take if Russia wanted to avoid these crippling restrictions. Matthew Sigel, head of digital asset research at investment manager VanEck, commented:
“Neither dictators nor human rights activists will find any censors on the Bitcoin network.”
According to Bloomberg, Russian billionaires and oligarchs can switch to cryptocurrencies to bypass any financial locks. Quantum Economics CEO Mati Greenspan added: “If a wealthy individual is concerned about their accounts being frozen due to sanctions, they may simply hold their Bitcoin wealth to be protected from such actions.”
Moving away from dollar hegemony
Encryption can be sent directly from person to person without interference from banks, centralized payment networks or third-party intermediaries. As reported by BeInCrypto on Feb 24, Russia has a robust encryption toolbox that can be used in such circumstances.
Vice President of Altamont Capital Management, Sahil Bloom, commented that a SWIFT cut could have “long-term second-round effects on Bitcoin and non-fiat currencies”, before adding:
“Russia may try to circumvent the impact of the restrictions through a combination of its domestic system and a move away from the dollar reserve currency hegemony.”
Cryptocurrency markets are down 6% since the start of the week, and $200 billion was wiped out the day the Ukraine invasion began.
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