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Russia-Ukraine war: Putin may use cryptocurrency to bypass sanctions

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As Russia declared a war on Ukraine, there are possibilities of further western sanctions to hit Moscow where it hurts most. At this critical juncture, crypto currencies or digital currencies may emerge as a powerful tool for the Kremlin to steer clear of sanctions.

Russian President Vladimir Putin on Thursday authorized a military operation in eastern Ukraine on Thursday in what appeared to be the start of war in Europe over Russia’s demands for an end to NATO’s eastward expansion.

US President Joe Biden hit back by saying he would announce further sanctions on Russia on Thursday, in addition to financial measures imposed earlier this week.

Sanctions are considered the most potent ways to have an impact on the behaviour of other countries.

RUSSIA MAY USE CRYPTOCURRENCY

Russia may use cryptocurrencies to blunt the impact of the sanctions through bypassing control points. It may also ink deals with anyone globally working with them via digital currencies, Business Today reported.

The learning comes from 2014 when the US imposed sanctions on doing business with banks, oil and gas developers of Russia after the latter invaded Crimea. Back then, the Russian economy was badly hit by the sanctions, Business Today reported, quoting the New York Times.

WHY CRYPTOCURRENCY?

Russia had a lot of time to gauge the consequences of these sanctions and they must have planned ahead, former federal prosecutor Michael Parker told the New York Times.

Banks verify the identities of their clients by following the Know Your Customer (KYC) norms. Cryptocurrency exchanges and platforms do not follow the same strict rules for tracking their customers.

According to experts, Russia possesses multiple cryptocurrency-related tools at its disposal, the New York Times report stated.

The Russian government has started creating its own central bank digital currency. The central bank’s digital currency can be used to trade with countries who are willing to accept it without converting it int dollars.

China, which is Russia’s largest trade partner, has already created its own central bank digital currency.

While all cryptocurrency transactions are recorded on blockchain, Russia has developed new tools that are capable of masking the origin of such transactions, the report says.

Illegal funds have already funnelled into Russia through a dark web marketplace called Hydra. Russia has the technology behind Hydra and other money laundering techniques to mask the origin of transactions.

ALSO READ | Russia declare war on Ukraine: Will petrol, diesel prices go up in India?

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