Russia's digital solutions to U.S sanctions

Following Russia’s invasion of Ukraine in February 2022, U.S has uncocked an onslaught of 500 sanction against Russia. There is only one objective of the sanction: to paralyse the economy of Russia and coerce Russia from drawing out of Ukraine. Some of the main sanctions include:

1. Cutting Russia from the SWIFT system. Without the SWIFT payment system, it would hinder Russian trade and transaction with many european and western countries.

2. Blocking Russia from using the Dollar. Blocking Russia from getting their hands on the primary currency further restricts Russia's activity in the international trade and finance world.

3. Freezing up to $600 billion dollars of foreign reserves. This cripples Russia’s ability to use its foreign exchange reserves to fend off sanctions, support its domestic financial system and meet its international payment obligations.

Don't worry, I can use Cryptocurrency instead

As Russia is completely kept in a completely deadlocked position following the crushing sanctions that the U.S imposed on them, Russia is now looking to work outside of its traditional financial system to slither its way out of its predicament. Crypto seems to be the perfect solution because of how unregulated it is, allowing Russia to bypass all sanctions and continue its international trade and cross border transactions with partnering companies.

Russia’s partnership with China and Iran to defy the U.S dollar

But for Russia’s strategy to work, Russia will need to find countries and partners who are willing to jump onboard and agree to use crypto to trade with them. Unsurprisingly, Russia has found two new buddies: Iran and China. These two countries, and Russia, surprise, surprise are all part of the BRIC coalition which has been planning for a long time to usurp the dollar’s dominance with their own BRICs currency.

In early 2023, Russia and Iran was talking over plans to launch a new cryptocurrency back by gold, which the two countries could use in their bilateral trade deals. Both countries have agreed that they would create a stable coin, a currency that would be immune to the volatility of the market by pegging the currency to a commodity or fiat currency. But stablecoins have proved that they are susceptible to failure as well, as seen in the collapse of the Terra stablecoin back in 2022.

Another country that is onboard with Russia is China. Russia has also ready announce its plans to trade with China once it is digital Ruble is release next year. As more western nations shunned away from Russia, the relationship between Russia and China has become stronger than ever. With this new digital currency, countries can trade more directly with one another without relying on payment system channels such as SWIFT.

Russia’s crypto solution can never mend the economic hole

Experts believe that cryptocurrency is just a stopgap solution to a much bigger economical problem. Digital currency can never patch up the hole in the Russian economy because:

1. Russia has lost a great deal of money after they were banned from using the dollar. Experts believe that it is unlikely that they would be able to make up the money even if they resume part of their trades with the new digital coins.

2. Russia is continuously losing money everyday that the Russia-Ukraine war drags on. This will further aggravate its declining economy

Cutting Russia off the global financial market

Knowing how much Russia would be putting their bets on Cryptocurrency, the U.S. has now imposed sanctions on more than 10 different subsidiaries of BitRiver, which is a Russian crypto mining company based in Switzerland. By doing so, the U.S is hoping to cut Russia off from the tools and hardware that it needs to mine crypto, which in the bigger scheme of things, cuts them off from the global financial system.

U.S continues hammering down on Russia by extending sanctions

China has now found itself under fire for its partnership with Russia after the U.S announced that they would be imposing more sanctions on China-based tech companies who have aided Russia's military inventory as part of an effort to undercut the Russian military machine waging war on Ukraine. U.S also announced that they won’t hesitate to impose secondary sanctions on any foreign financial institutions that continues to aid Russia in its military production.

It seems that after targeting Russia’s economy, U.S is now trying to cut off Russia's military supplies. But as a military powerhouse for many years, I doubt these sanctions might be do the job just yet.

Crypto might not be the best solution yet

So dear crypto experts, what do you think? Do you think Crypto can really mend the hole in the Russian economy and be a good replacement for the U.S dollar? And can you predict Russia's next step? Please tell me!