Chances are that you know what is going on in the world right now, but if you don’t, no worries, we’ll give you a brief introduction.
Essentially, Russia invaded Ukraine with its military and started a war. Yeah, we know, it’s not something we would like to talk about – but yet again, this war caused major shifts in the whole world, and some of those shifts impacted crypto space as well.
If you wish to follow what is going on on the combat field directly, we suggest that you follow some of the many live blogs that cover the action of both forces minute-by-minute.
A lot is going on in the background of this war, and one could say that either Russia or Ukraine is in the right here (in either case, we are strongly against a war), but in this article, we won’t go that deep. We will, however, cover briefly the story of this war in the next paragraph so don’t worry, you won’t be kept in the dark.
But the main focus of this article is the question that gets asked a lot in the last couple of weeks: “Is crypto banned in Russia?” We will try to answer, and try to anticipate what will happen to the crypto market in Russia, and how war will affect it in the upcoming months.
Relationship between Russia and Ukraine
The story of the bad relationship between Russia and Ukraine isn’t new. But, let’s take a step back and talk a bit more about some distant past when things weren’t as they are today – when Russia and Ukraine had a good relationship.
In the 1700s, the territory of what is now known as Ukraine, became a part of the Russian Empire under Catherine the Great. Back in the day, the Russian empire was extremely strong, and Ukraine pretty much didn’t have a choice – it became a part of Russia.
In the early 20th century, Ukraine tried to reclaim its independence. People fought and, well, they lost. Instead of independence, Ukraine became a part of the Soviet Union, a huge communist state that lasted from 1922 to 1991. It is thought to be one of the biggest forces ever to be present in this world (while we can debate whether the regime was good, it’s undeniable that the Soviet Union had massive political and military power).
And, Ukraine was part of it. The Soviet Union was centralized, and apart from Ukraine, other nations were a part of it as well (Latvia, Estonia, Belarus, etc.)
Many people say that Stalin was a man who created modern Ukraine and that Ukrainians should thank him for the modern look of their country. We aren’t the ones who will say whether this is true or false, but this premise is one thing that Russia almost always mentions when it comes to the sovereignty of Ukraine.
Modern Ukraine and Russia
After the Soviet Union collapsed in 1991, Ukraine claimed its independence and became a country of its own for the first time. From then until now, Ukraine was tightly bonded to Russia. Many Ukrainian people declare themselves as Russians, and statistics show that about 30% of the population speaks Russian (some say that this number is even closer to 50%).
But, even though Ukraine has Russian roots, in the last 15-20 years, it was politically closer to the west of Europe and the US. This, of course, didn’t suit Russia, its first neighbor, since it’s trying to stay as much as possible away from the western influence and at the same time, closer to China.
Things escalated when Ukraine showed interest in joining NATO. This, of course, was unacceptable for Russia, since it would mean that the NATO forces would be basically at the border of the country. And, well, they invaded Ukraine.
In a nutshell, this is it – but it goes much deeper than that. If you want to learn more about why is Russia invading Ukraine and the story behind it, you can check this video from the RealLifeRole.
But now, let’s see how this war impacts the crypto market in Russia, and globally.
War sanctions in Russia
Russia is economically a strong country, but the sanctions that the rest of the world introduced because of the war had a great negative effect. Even though Russia tried to stay independent from western society, politics, and economics as much as possible, these sanctions did a lot of damage, and many people wondered what will Russia do to battle them, and stay on healthy feet.
Some sanctions were aimed at the banking sector, or more precisely, at the SWIFT number that every bank has. Without acceptance of Russian banks’ SWIFT number in the worldwide trading system, the banks simply wouldn’t be able to conduct business in any country outside Russia, which would be a huge blow on the economics point of view.
Because of this, together with the downfall of the value of Ruble, the Russia-Ukraine war has thrust crypto into the spotlight and made a lot of people wonder if Russia can use cryptocurrencies to avoid sanctions and continue to trade globally. That would be the first case of global usage of cryptocurrencies on a higher level and would confirm that, in some way, crypto can be used for a large number of big transactions between two countries.
Obviously, Bitcoin is what first comes to mind, and people wondered whether it can be used to avoid the sanctions that were active towards Russia. One may wonder, why would crypto be useful in this case? Well, the answer is simple.
Crypto in Russia
The ruble lost over 30% of its value compared to the US dollar since the beginning of the war,
Certainly, centralized currency wasn’t a good choice for people living in Russia, especially during the war and many sanctions that were in place. So, Bitcoin and crypto, in general, seemed like a reasonable choice.
But, even though people may think that blockchain technology and therefore cryptocurrencies are untraceable, this isn’t the case – especially if someone wants to move large portions of one currency (and Russia certainly would do that).
The thing is, if Russia plans to use crypto as a form of payment in the near future, it will have to deal with sanctions that would happen on the crypto exchanges. For sure, if they want to buy/sell certain coins, for millions of euros, the exchange would notice that and would flag the transaction for a thorough examination. So, even if they try to be untraceable, they just couldn’t.
With that being said, exchanges such as Coinbase that originate from the US, or Binance would surely have all of their alarms turned on if a large transaction occurs. And it’s hard to think that a company from the US (Coinbase) wouldn’t follow the sanctions its own country placed for Russia.
But, this doesn’t mean that crypto isn’t being used in these unfortunate times. Even though big transactions are often easy to follow, smaller ones aren’t. And this is where normal Russians, people who aren’t that wealthy, saw their chance.
Impact of war on Russian crypto
We said before that the Ruble, the currency of Russia, lost over 30% of its value from the beginning of the war. This is to be expected since all the sanctions that are currently in place impacted the Russian economy to unimaginable heights. Inflation will surely be even higher in the upcoming months. Heck, the Ruble is now worth less than 1 US cent, which is a first.
All of this made a lot of Russians scared. They are scared because the money they are paid with is now worth way less than it used to just a few months ago – and this means that they can buy less of everything with the same amount of money.
With that being said, Russians are exchanging Rubles for other currencies, such as euros or dollars. But, they are also buying crypto. Statistics from crypto exchanges show that there has been a spike in Ruble/Tether and Ruble/Bitcoin pairs. This means that many Russians are trying to save their wealth by converting the Ruble they have to something more stable, such as Tether or Bitcoin.
This also impacted the value of Bitcoin, in a good way. In one day, after the war started, the value of BTC went above $44,000, which clearly shows the impact war has on crypto space.
Still, the US government stated that they are closely monitoring the movement of the crypto market in Russia and that they are expecting exchanges to follow sanctions that the US has in place towards Russia. All of this makes trading with crypto on Russian territory quite hard, unless you are using fake accounts or some other method.
All this talk that Russians are exchanging their Rubles for Bitcoin again heats the story of Bitcoin being digital gold because it doesn’t lose value as much as other currencies, as is considered to be a “safe bet”. However, we think that many years still have to pass until we can say that this is the truth.
Just because one situation in the world made a lot of people try to exchange one currency for another, doesn’t mean that Bitcoin is automatically a gift from the gods. Sure, in these unfortunate cases such as war, Bitcoin can come as a godsend, and we are sure that many Russians are happy that they have an opportunity to swap their Rubles for something else.
But from a global point of view, we think that there is still time before we call Bitcoin “digital gold”. We saw earlier this year that the value of BTC can change drastically in just a span of a few weeks, so for it to be considered “digital gold”, BTC just needs to be more stable.
The headlines that Bitcoin will hit $200k in a few years seem to be far-fetched, and we will just have to let time do its own thing to know whether that will be real or not.
Crypto might be accepted globally, just not yet
Although the war in Ukraine impacted the cryptocurrencies market to some degree, we think that we are far away from a global acceptance and usage of crypto. These unfortunate events surely placed wheels in motion, but even though crypto is decentralized, it can still be controlled to some degree, and subject to sanctions.
We just hope that the war will end soon, despite how it can impact the value of cryptocurrencies. In situations like this, everything else becomes irrelevant, and if Bitcoin can help Russian or Ukrainian people to live better lives and save their wealth, we can only applaud that.