Russia’s invasion of Ukraine has sparked a series of military, political, humanitarian and economic debates. One of the most novel conversations shortly after the aggression related to the interaction between cryptocurrencies and the broader geopolitical situation. As the first major conflict in the crypto era, this war raises questions about how cryptocurrencies can be used to change the nature of war and conflict in the 21st century.
At the beginning of the hostilities, I was optimistic about using cryptocurrencies to support Ukraine’s civil defense, with an interest in the theoretical ability to promote cross-border money laundering and sanctions evasion. .. Four months after the conflict, it is clear that many predictions, including some of me, are groundless. Moreover, at a basic level, the role of cryptocurrencies in this dispute does not justify the concerns of skeptics, but broadly verifies the ideals of their supporters.
As the government is forced to tackle the rapidly protracted war of attrition and strict sanctions, policy makers value the good, evil and ugliness of cryptocurrencies as a geopolitical tool and regulate accordingly. You need to take steps to adjust.
Good things
Let’s start with the positive. In the early days of the aggression, cryptocurrencies were the most effective tool for putting money into Ukraine. Individuals were able to deposit funds in the official Ukrainian government’s wallet while the government moved aid through a cumbersome legislative process. According to Alex Bornyakov, Deputy Minister of Digital Transformation in Ukraine, “Ukraine has raised over $ 50 million in crypto assets and was able to transfer these funds to fiat currency.. This rapid distribution process was only possible due to the speed, efficiency and scalability of the blockchain.
My assumption that cryptocurrencies are used for targeted sanctions evasion proved to be wrong. Despite this fear, neither oligarchs nor thief politicians use blockchain in a meaningful way to offload sanctioned assets or transfer wealth to more favorable jurisdictions. did. We have seen the steps taken for the potential to make money for individual crypto companies such as Bitriver, but these sanctions are the result of non-cryptographic unique corporate activities and the result of unique cryptographic properties. Not.
In fact, due to the general lack of attempts to evade cryptocurrency-based sanctions, many regulators and national security authorities have to admit that crypto is not a malicious tool for evading sanctions. did not. In a testimony submitted to the House of Representatives, the Deputy Director of the Financial Crimes Enforcement Department said:No major evasion by the use of cryptocurrencies.. “
Although still in its infancy, a wide collection of private sector compliance tools and government intelligence has proven effective in capturing and deterring immoral and unethical behavior in the blockchain. ..
Bad and ugly
Numerous evidences of the positive role of cryptocurrencies in this crisis justify their existence and test their supporters’ claims. However, these broadly positive use cases cannot be interpreted as future exemptions from improving cryptographic regulatory compliance across the industry.
The large-scale use of cryptocurrencies for illegal activities is partly due to the industry’s adherence to “customer knowing” standards. After all, it took time for various crypto exchanges to fully match the sentiment of Western sanctions. government. The high use of crypto as an illegal tool is primarily due to the relatively low liquidity of the crypto market.As In February, the Center for Strategic and International Studies noted that SWIFT processed approximately $ 5 trillion transactions daily. Cryptocurrency trading volume for the same period: $ 24 billion.
When cryptocurrency grows to the scale that the industry expects and supports, it rarely prevents it from becoming a much larger tool of financial fraud. Now, small issues, such as Bitriver’s role in avoiding sanctions, are greatly magnified. If we do not currently implement appropriate security, compliance, and customer awareness measures, the industry will inevitably need to address more serious future issues. If not now, it may be too late to react. This should serve as a rallying cry for the entire industry.
Lessons and future paths
As the global crypto-regulatory debate heats up, legislators will inevitably point out the framework of sanctions associated with the Russian-Ukrainian war to support and criticize cryptocurrencies as a geopolitical tool. .. In these discussions, one thing needs to be fully understood. The existing extraordinary legal framework used by private companies and governments has so far helped the industry. However, the expected cryptographic growth requires considerable future planning.
A proper regulatory framework requires acknowledging both truths. It is equally inappropriate for skeptics to ignore the widespread and positive reality of cryptocurrencies as a geopolitical tool, and to pretend that the current system is satisfactory, regardless of growth expectations.
