Riding The Wave News Summary #20
With Russia's Invasion of Ukraine, the week ahead is full of uncertainty
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News
Table of Contents
Tweets (Bitcoin RSI, Russia removed from Swift (for some banks), Companies to stop supplying microchips to Russia)
Ukraine's government raises over $10 million in cryptocurrency donations
Russian Bitcoin and Other Cryptocurrencies Could Be Part of Future Sanctions
Russian Rubles Could Become 'Worthless' as Allies Target Central Bank After SWIFT Move
EU Commission to remove Russian banks from SWIFT cross-border network
‘Coin days destroyed’ spike hinting at BTC price bottom? 5 things to watch in Bitcoin this week
Crypto World Grapples With Challenge of How to Handle Sanctions
Microsoft’s Minecraft Goes Web3 With 'NFT Worlds' on Polygon
Tweets
Ukraine's government raises over $10 million in cryptocurrency donations
The official Twitter account of the Ukrainian government on Saturday posted addresses for two crypto wallets, one accepting only bitcoin and the other taking ether and tether, a token that tracks the value of the U.S. dollar.
As of Sunday, those wallets have attracted $10.2 million worth of crypto, according to research from blockchain analytics firm Elliptic. That’s on top of the millions in digital currency donated to nongovernmental organizations supporting the Ukrainian military.
The development shows how Ukraine is turning to crypto for assistance during Russia’s military offensive in the country, which began on Thursday.
Come Back Alive, an NGO that provides equipment to the Ukrainian military, has accepted crypto donations since 2018. It has raised millions of dollars worth of digital currency since Russia’s invasion began.
Total crypto donations to the Ukrainian government and NGOs supporting the military now stand at $16.7 million, according to Elliptic.
“Cryptoassets such as Bitcoin have emerged as an important alternative crowdfunding method,” Tom Robinson, Elliptic’s chief scientist, wrote in a blog post on Sunday. “They allow quick, cross-border donations, which bypass financial institutions that might be blocking payments to these groups.”
Come Back Alive had its Patreon fundraising page suspended this week, with the company saying it “does not allow any campaigns involved in violence or purchasing of military equipment.” Patreon lets users receive a monthly income through paid subscriptions.
The U.S., European allies and Canada on Saturday agreed to remove certain Russian banks from Swift, the interbank messaging system. They also agreed to prevent Russia’s central bank from deploying its international reserves in ways that may undermine sanctions.
These donations are great both for Ukraine and for crypto. It gives great visibility to how useful crypto is and it legitimizes it via a country accepting donations using it. It’s also great because if the world wasn’t on Ukraine’s side & they were being sanctioned Ukraine could still receive these funds. Crypto depoliticizes money allowing you to support what you want without anything getting in the way.
Russian Bitcoin and Other Cryptocurrencies Could Be Part of Future Sanctions
Washington is considering a novel area for possible further sanctions against Russia: cryptocurrencies.
Targeting the country’s access to cryptocurrencies, such as bitcoin and ether, would take sanctions policy into uncharted territory. Blocking transactions would be challenging, since by nature private, digital currencies are designed to exist without borders and for the most part outside the government-regulated financial system.
The Biden administration is in the early stages of exploring the area, with the aim of disrupting economic activity in the country, The Wall Street Journal reported Friday, citing an administration official. Sanctions on Russia’s crypto activities would need to be crafted in a way that didn’t destroy the broader crypto market, which might make imposing them difficult, the official said.
Steps by regulators in recent years to have greater oversight of crypto transactions could give governments leverage, for instance, to ask crypto exchanges and brokerages to block transactions in certain countries or with certain government-issued currencies, such as the ruble.
There are precedents for going after crypto activity. The administration’s blacklisted Russian-owned cryptocurrency exchanges SUEX OTC and Chatex in September for allegedly helping launder ransomware payments.
Yet President Vladimir Putin said in January that Russia has “certain competitive advantages” with it regarding electricity surplus and a trained workforce. Russia’s Finance Ministry has submitted draft regulations to the government that would allow residents to invest in cryptocurrencies through licensed entities though cap the amount of rubles they could invest. The continuing dispute prompted Mr. Putin to publicly call for a compromise last month.
One motivation to target cryptocurrencies is that they could potentially be used to get around other sanctions that focus on the traditional banking and payments system.
Iran, which faces strict sanctions from the U.S. that have limited its access to global financial markets, has used cryptocurrency mining to circumvent sanctions, according to analytics firm Elliptic.
Like Russia, Iran is a major oil producer, allowing it to use that fuel to power bitcoin mining and reap the digital currency in exchange, using it to buy imports. This allows Iran to avoid sanctions on payments through Iranian financial institutions.
This could be implemented but it would be extremely challenging for countries to enforce. The only place that could effectively block this route is if the person wanted to convert their crypto at in exchange for USD or another currency but even then if it’s transferred between a wallet in between the person can deny wrongdoing to some extent, especially if they trade the funds for an NFT.
If Russia went this route it could also weaken the conviction with which countries have set sanctions. Sanctions often hurt both parties as you are denying yourself access to a route of trade. They work because many people sanction the one-party spreading the economic pain between them and concentrating it on the country being sanctioned. If Russia uses Crypto to alleviate some of this pain it could tip the scales making countries less willing to continue with their sanctions. I would be surprised if Russia went this route but I did want to mention it as it is possible.
Russian Rubles Could Become 'Worthless' as Allies Target Central Bank After SWIFT Move
After the EU, Canada, and the US agreed to remove selected Russian banks from the SWIFT messaging system, the Russian Central Bank is to be targeted next, which could make rubles "close to worthless."
In a joint statement on Saturday evening, the allies said they commit to ensuring that the Russian banks are disconnected from the international financial system and harm their ability to operate globally.
But what comes as a more unexpected and possibly more painful move is that the allies also said they "commit to imposing restrictive measures that will prevent the Russian Central Bank from deploying its international reserves in ways that undermine the impact of our sanctions."
"This would likely lead to massive bank runs and dollarization, with a sharp selloff, drain on reserves -- and, possibly, a full-on collapse of Russia’s financial system," she told Bloomberg.
However, it’s not clear how severe these restrictions will be.
Meanwhile, traders are preparing for "a catastrophe" on the Russian currency market on Monday.
SWIFT is important for many financial services (list of some in one of the featured tweets). If countries go through with cutting Russia off it would make interacting financially via the internet extremely challenging if not impossible. Crypto might be used to circumvent this to some extent as it would be much more challenging to block/track these payments for services.
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