Russian Sanctions May Test Crypto's Proposition

Parts of Russia are about to be cut off of the global financial system.

AccessTimeIconMar 1, 2022 at 6:57 p.m. UTC
Updated May 11, 2023 at 3:42 p.m. UTC

A coalition of countries including the U.S. and European Union want to freeze the Russian central bank’s international reserves and lock (some) Russian banks out of the global financial system.

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New financial order

The narrative

Russia’s invasion of Ukraine has set the stage for a sea change in how we perceive the global financial system. This is what the crypto industry has been waiting for.

Why it matters

The present set of geopolitical and financial factors might make this crypto’s moment. Certainly it’s a test of cryptocurrency’s proposition value of being a stateless means of exchange. Is the industry ready?

Breaking it down

Russia invaded Ukraine last week. After massing 200,000 soldiers along its border with Ukraine, one of the world’s largest nations launched cruise missiles, aircraft, warships and land convoys into its neighbor.

In response, a coalition of nations including the U.S., U.K., European Union, Canada, Japan, South Korea and several others have pledged to lock Russia’s largest banks out of the SWIFT global financial system, seize Russian assets and otherwise make it difficult for Russia’s economy to continue as is.

This has led some to say this might be crypto’s moment.

And you know what? I think it might be. Ukraine suspended electronic money transfers and its ATMs are running out of cash but the country has received millions in crypto fundraising – both the government and charity/NGO groups – that are being used to purchase critical goods.

Russian oligarchs or individuals might be turning to crypto as a flight to safety after the Russian ruble crashed.

As I stated last week, I do not mean to minimize the loss of life or scale of destruction in any way. This is a tragic and unnecessary war launched by a would-be emperor.

(For what it’s worth, I don’t think I necessarily agree with the idea that crypto will be the tool for officials to evade sanctions.)

That being said, all of the conversation surrounding this so far sounds like it’s an asset or a tool, rather than a currency existing within its own circular economy. My view is basically unchanged from last week’s newsletter, but we’re not yet seeing a scenario where bitcoin (or any other cryptocurrency) is being used solely as a means of exchange.

Russia’s response to these sanctions so far seems to have been to double down, which in turn will likely lead to further economic sanctions.

Today, the EU’s European Commission is supposed to be meeting to determine how to remove Russia’s largest banks from the SWIFT interbank messaging system.

Bank of Russia chief Elvira Nabiullina claims Russia has a SWIFT alternative for domestic payments, and is inviting international banks to also participate. Whether it’s successful will depend entirely on whether these other banks want to risk being cut out of SWIFT themselves and whether they see the ruble as a viable alternative to the dollar as a world reserve currency.

I imagine we’ll have more to say on this in the coming week. For now, I want to refer you all to the coverage CoinDesk has put out over the past eight days, which really covers the wide range of issues at play here. Some selected stories:

On another note, there is a continuing, massive humanitarian crisis in Ukraine right now. For those interested in donating to relief efforts, this resource has been shared by a research fellow and former reporter.

Biden’s rule

Changing of the guard

Key: (nom.) = nominee, (rum.) = rumored, (act.) = acting, (inc.) = incumbent (no replacement anticipated)
Key: (nom.) = nominee, (rum.) = rumored, (act.) = acting, (inc.) = incumbent (no replacement anticipated)

U.S. President Joe Biden will speak on the economy this evening during his first State of the Union Address, although he’s also expected to speak to the ongoing effort to have Russia back down. Federal Reserve Chair Pro Tempore Jerome Powell will also be speaking to the House Financial Services Committee tomorrow at 10:00 a.m. Eastern and the Senate Banking Committee Thursday at 10:00 a.m.


Outside CoinDesk:

  • (The New York Times) Scientists are using ultrasounds to bring endangered species back, according to the New York Times.
  • (IPCC) The United Nations Intergovernmental Panel on Climate Change is out. It found that some of climate change’s effects might be irreversible at this point but all hope is not lost yet. The Washington Post has a solid summary of some of the key takeaways.

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at or find me on Twitter @nikhileshde.

You can also join the group conversation on Telegram.

See ya’ll next week!


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Nikhilesh De

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.