Author: Dr. Angelika Hellweger 10 October 2022
Russia recently announced it would allow any industry to accept bitcoin and cryptocurrency for international trade. Yet the latest European Union (EU) sanctions intend to deal a blow to those Russian plans.
Last month, the Russian Deputy Finance Minister Alexie Moiseev stated that "there is no way to do without cross-border settlements in cryptocurrency", as the country assessed how best to introduce cryptocurrency to its economy.
Earlier this year, the EU’s fifth package of sanctions measures tackled only “high-value” crypto-asset services for Russians and Russian-registered organisations: those for digital holdings exceeding €10,000 in fiat value (approximately US $11,000 at the time). However, following Russia’s announcement on cryptocurrency and its controversial referendums in Ukraine’s Donetsk, Luhansk, Kherson and Zaporizhzhia regions, the EU responded with an eighth sanctions package. This latest package bans all bitcoin and cryptocurrency wallets, accounts and custody services in Russia, irrespective of the amounts involved. It also forbids services from being offered by European crypto providers to Russian residents and entities unless they live in the European Union.
At this stage, however, it is unclear how big an impact this ban will have. Of the top seven global crypto exchanges popular with Russians – including Bybit, Coinbase, FTX, Kraken, and Gate.io, - none is a “European resident”, which would be compelled to comply with the new measures. Furthermore, enforcement activities may prove difficult as transactions on the blockchain might not be associated with an individual, as is the case with many other, more conventional business services.
Despite the EU sanctions, decentralised exchanges will remain available to Russian users. These exchanges do not have a centralised intermediary between the seller and the buyer, and crypto assets are traded using smart contracts. Such exchanges do not store their clients' funds and passwords from their crypto wallets – and cannot control transactions between their users.
Angelika is a specialist in international, high-level economic crime investigations and large-scale commercial disputes. She has widely-recognised expertise in representing corporates and conglomerates in Europe, the Middle East, Africa and United States.