It’s remarkable to think that just a year ago much of the market was angry about meme actions and the ability of cryptocurrency to disrupt the market and how both were dangers to people. investors.
How much has changed, and how fast.
Before Russia invaded Ukraine, the uses of cryptocurrency were limited to how quickly it made money for its fans, how easily it could lose or gain value, and the irritation of large traditional financial institutions by the vast market movements they were able to achieve in 2020 and 2021.
Today, however, market watchers and citizens of the world find themselves learning more about cryptocurrency, and bitcoin in particular, for another reason: how it enables and has the potential to continue. to allow the Russian elite to avoid sanctions.
It is also possible that Russian hackers, well known to American voters for manipulating the 2016 presidential election, are simply hacking the cryptocurrency they need.
Wondering who compiled the list of Russians under sanctions? TheStreet has you covered.
follow something without a trace
As sanctions have escalated over the past week, international regulators are increasingly focused on ensuring that the use of cryptocurrencies leaves a trail they can follow.
Although much of the mining and trading of cryptocurrency, and bitcoin in particular, takes place in forums unknown to most bank officials, there are ways to track who and what holds how much money. a particular amount and which coin.
Keegan Francis, bitcoin and cryptocurrency expert and founder of Finder, told TheStreet that there are ways to find what you’re looking for – and those sanctioned are no different.
“Generally, yes. Most blockchain transactions leave an audit trail that can be tracked to learn more about who previously held the coin,” Francis said.
This is a good time to note that we said there are “certain” ways to track different types of crypto, and only under certain circumstances.
“That being said, coins like Monero and zCash don’t leave a trackable trail, so they’re desirable for those who want to keep their transaction details private,” Francis said.
Rance Masheck, CEO and Founder of iVest+, put it more bluntly, pointing out that currently, international sanctions do not cover bitcoin or other cryptocurrencies as assets that must be frozen.
“The use of coins does not leave a trail. Coin exchanges, which means converting coins to another currency, will usually leave a trail that international regulators can track,” Masheck said.
“Think of it like buying your neighbor a television for cash. There’s no way anyone else will know, but how do you get that money out of your bank and how does your neighbor get it? puts in his bank is tracked.”
Michael Parker, head of the anti-money laundering and sanctions practice at Washington law firm Ferrari & Associate, told TheStreet that even with money there is recourse to track what has changed hands. , how and for how much.
“For comparison: cash, in itself, is very difficult [or] impossible to follow. So US law has reporting requirements for cash transactions,” Parker said.
“For example, purchases, deposits, or people leaving/entering the United States with more than $10,000 in hard currency require a specific form to be completed and registered with the US government,” he said. .
“The legal requirements apply to businesses, people and institutions that trade in cash because otherwise it is a medium of exchange that is effectively anonymous,” said Parker, who is a former federal prosecutor.
“[Bitcoin]on the other hand, has a blockchain public ledger that creates a permanent record of all its transactions: in this way, it is much less anonymous than hard currency.
You can learn all about how this process works here.
How much ransomware are we talking about here?
On the other hand, you might not have to steal what you already have and you can easily move around.
Chainanalysis estimated in its 2021 Crypto Crime Report that around $400 million worth of cryptocurrencies were bought up by Russian-linked companies or individuals that year, accounting for almost two-thirds of total ransomware revenue. in 2021.
There are many markets on the so-called dark web, but the most popular, according to research by Chainanalysis, is Hydra, which allows billions of dollars to cross borders and bypass the official banking system altogether. .
“We know there are no questions asked, and we know that Hydra operates not just across Eastern Europe but across Western Europe,” said Kim Grauer, Research Director at Chainalysis, New York Times. “There are definitely cross-border cases going on.”
Hydra only requires sellers to cash in their crypto through regional exchanges, which may make it opaque to some regulators, but easier to understand if a keen observer was looking for a huge flow of volume.
You can read more about how it works here, in a brilliant analysis by our colleague Luc Olinga.
The result of tracking Russian assets
Although the idea of Russian war profiteers traveling to Biarritz to buy a new Gucci handbag may be maddening to many people, it is still legal.
While the United States has experimented with ways to sanction altcoin trading through its sanctions on North Korea and Iran, it has yet to put in place a specific set of sanctions aimed at curbing the use of altcoins. cryptocurrency.
This reprieve may be brief – the Treasury Department is reportedly finalizing guidance on how to crack down on assets held as cryptocurrency. But for now, it’s still perfectly legal for sanctioned listers to access their bitcoins and other altcoins.
Wondering what exactly is an oligarch? We can help you with that too.
Sometimes a punishment is only a punishment in name
It is also important to note that not all countries have imposed sanctions yet, which simply means that a company carrying out transactions of any kind, someone on the sanctions list would be penalized and fined for that.
Therefore, a sanction itself does not freeze anything, Masheck said.
“The SWIFT lockdown and seizure of assets freezes transactions,” he said.
What if a Russian on the sanctions list wanted to buy a yacht, TheStreet asked. Could he go straight in, pay in bitcoins, and be fully within the letter of the law, and not in violation of the sanctions?
“So one answer would be, if a sanctioned Russian or Russian entity were to walk into a business in the country that imposed the sanctions and seek to purchase a yacht with a US credit card,” Masheck said, “that would be traceable and immediately the company would be in trouble and ultimately fined for doing this.”
But there are other scenarios, like everything else in this war so far.
“Now, if the same Russian entered the same company and offered to pay in bitcoins for the yacht, the transaction would not be traceable,” Masheck said, “but the company would still be in violation of sanctions if found out. .”