Commentary
Unless you happen to live under a rock, you are no doubt aware that the Chinese Communist Party (CCP) has rolled out its own digital currency, the digital yuan. Designed to directly compete with the U.S. dollar, the digital yuan was also designed for another reason—to evade U.S. sanctions, according to experts.
Another country that has chosen to take a leaf out of the digital currency playbook is Russia, a close ally of China. Like Beijing, Moscow will likely use this digital avenue to inflict further misery on the world and circumvent U.S. sanctions.
To understand Russia’s plans, we must first discuss cryptocurrencies. Of course, one cannot discuss cryptocurrencies without discussing bitcoin, the king of cryptocurrencies. Contrary to popular belief, bitcoin is amoral. Like a rolling pin, bitcoin can be used as a tool for good as well as bad.
In Eastern Europe, for example, the people of Ukraine continue to benefit greatly from bitcoin donations. Since the country was invaded by the Russians on Feb. 24, nongovernmental organizations have raised more than $11 million in cryptocurrency donations, most of it in bitcoin. Ukraine, perhaps acknowledging the inevitably of an invasion, recently opted to legalize bitcoin.
As Ukraine, one the largest countries in Europe, crumbles before our eyes, and people struggle to withdraw cash from banks, cryptocurrency donations offer many citizens an invaluable lifeline. However, the likes of bitcoin also offers another country a lifeline, and that country is Russia. Yes, the very country that invaded a sovereign nation, the very country responsible for the murder of innocent Ukrainians, stands to benefit from bitcoin.
Evading Sanctions
On Feb. 22, a couple of days before the invasion took place, President Joe Biden, to his credit, hit Russia with a number of economic sanctions. On Feb. 24, after Russian soldiers crossed the Ukrainian border, the Biden administration updated the list of targets. Some economists believe that U.S. sanctions alone could cost Russia $50 billion per year.The Russian economy is suffering, and the Russian people, many of whom vehemently opposed the invasion, are suffering the most. Ukraine is crumbling, but, with the help of other countries, it will rise again. Russia, on the other hand, is a pariah. Patriam non grata, if you will. It may very well become the next hermit kingdom. Nevertheless, Vladimir Putin knew the invasion of Ukraine would be met with incredibly severe economic sanctions. His administration, one imagines, has planned accordingly.
This brings us back to the most popular cryptocurrency on the market, bitcoin. The decentralized nature of crypto allows the decent—as well as the indecent—to benefit from pseudonymous peer-to-peer transactions. To quote Matthew Sigel, a global investment expert, neither “dictators nor human rights activists will encounter any censor on the bitcoin network.”
In other words, God may very well judge Putin harshly for his actions, but the bitcoin network certainly won’t. Remember, bitcoin (and it’s 10,000 imitators) was created as a direct response to fiat currencies, and as a means of avoiding central banks. This works in Russia’s favor, a country that mines a staggering amount of bitcoin; cryptocurrencies now account for a large chunk of Russia’s financial market.
Of course, Russia won’t be the first country to use bitcoin to evade U.S. sanctions, and it won’t be the last. North Korea, another country intimately familiar with U.S. sanctions, also has a soft spot for bitcoin. Last year alone, North Korean hackers stole nearly $400 million in cryptocurrencies. According to a recent BBC report, the stolen loot was then used to fund the country’s missile programs.
Which brings us back to the crisis playing out in Eastern Europe. Although bitcoin has helped (and continues to help) many Ukrainians weather the financial hardships of war, it may also help the Russians continue to wage the most expensive of wars.
More worryingly for the Ukrainians, even if the Russians don’t use the likes of bitcoin to circumvent U.S. sanctions, they have one other digital card up their proverbial sleeves–the digital ruble, which was literally designed to mitigate the risks of foreign sanctions.
This is both the blessing and the curse of digital money. It is an amoral tool that can be used by the good, the bad, and the downright dangerous.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
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