Cryptocurrencies May Bypass President Biden's 'Devastating' Sanctions on Russian Banks and Elites

Sanctions announced by U.S. President Joe Biden in response to Russia’s attacks on Ukraine do not include cutting off payments or cryptocurrency transfers on the country’s SWIFT system.

In a statement from the White House on Thursday, Biden said the United States, its allies and partners would impose sanctions aimed at making Russia pay a "devastating price" for "Putin's choice of war on Ukraine." The US president announced that the US would cut off its financial system from Sberbank, Russia's largest bank, and impose sanctions on VTB bank, Otkritie bank, Sovcombank OJSC, Novikombank and their subsidiaries. "Comprehensive blockade sanctions". Biden also included several elite nationals who "got rich at the expense of the Russian state" as part of Russia's punishment.

In response to European officials, however, Biden announced in an interview with reporters on Thursday that the economic measures would not extend to cutting off Russia from the SWIFT network, a payment system used globally. Leaving that option open for the Russians, and seemingly unable to block cryptocurrency transactions, could reportedly lessen the impact of any sanctions imposed by the U.S. and its allies.

Russian billionaires may circumvent any U.S. sanctions by using cryptocurrencies to buy goods and services and continue to invest outside the country that suffered worse economic fallout from the invasion, Bloomberg reported Thursday. Under U.S. sanctions, individuals in Iran were able to solicit cryptocurrency donations for flood victims in 2019, while Venezuelan President Nicolás Maduro introduced a bill in 2020 aimed at using cryptocurrencies to circumvent various sanctions imposed on the country.

Mati Greenspan, founder and CEO of Quantum Economics, said: “If a wealthy individual is concerned that his account may be frozen due to sanctions, he can simply hold his wealth in Bitcoin to protect himself from such actions.”

Ukrainian Foreign Minister Dmytro Kuleba urged not to allow Russia to continue using the SWIFT network. President Biden said the sanctions imposed on the five Russian banks "would have the same consequences, perhaps even more severe" than SWIFT, but would cut the country's connection to the SWIFT network "as an option" if necessary. Neither Biden nor Kuleba spoke directly about the possible impact of cryptocurrencies in circumventing sanctions.

One thing to watch this afternoon is whether those sanctions will include a ban on Russia's use of the SWIFT communications system, which would cut off nearly all of Russia's international financial transactions.

(except cryptocurrencies)

— Scott Bixby (@scottbix) February 24, 2022

Biden's announcement followed reports that Russia had invaded Ukraine, bombing a military airfield near the capital Kiev and hitting targets across the country with missiles. In response to the attack, the United States sent additional troops to Germany and Poland, and Biden appeared to be hitting Russia both economically and in a show of military might.

However, a report in The New York Times said the sanctions may not have the effect the US president had hoped.

Former U.S. Attorney Michael Parker said: "The Russians had a lot of time to think about this specific consequence. It would be naive to think they didn't have the right solution in place."

The situation in Ukraine is still developing, but the financial impact of the attack on both cryptocurrencies and traditional markets has already been felt. Bitcoin’s price dropped as low as $34,000 on Feb. 24 following news of the Russian invasion of Ukraine, but has since recovered and is trading above $38,000 as of this writing.

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