Crypto Still Isn't Helping Russian Oligarchs Evade Sanctions

This feels like a perfect test case for crypto’s value proposition that has yet to materialize.

AccessTimeIconMar 8, 2022 at 8:30 p.m. UTC
Updated May 11, 2023 at 6:31 p.m. UTC
AccessTimeIconMar 8, 2022 at 8:30 p.m. UTCUpdated May 11, 2023 at 6:31 p.m. UTC
AccessTimeIconMar 8, 2022 at 8:30 p.m. UTCUpdated May 11, 2023 at 6:31 p.m. UTC

Where are the sanctions-evading crypto use cases? Surely by this point we’d see something around that, right?

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The narrative

One of crypto's purported use cases is as an uncensorable, stateless means to store and transact value. We're sort of seeing that play out in Ukraine. We aren't seeing another use case play out at all in Russia – at least, not yet.

Why it matters

Crypto faces another defining moment as lawmakers and users literally worldwide consider its uses – real and potential – in the Russian invasion of Ukraine. It will be an interesting test for the sector.

Breaking it down

This particular newsletter originated on Saturday night when I was getting drinks with my colleague Danny Nelson (if you don't already read him, you should).

We have heard a lot over the last week that crypto is not being used to undermine international sanctions against Russia or breakaway regions of Ukraine, and my question is: Why on Earth not? The whole idea of crypto is that it is supposed to be a stateless form of money or store of value, one that allows you to maintain your fiscal resources outside of the government or outside of any government entity. It's supposed to be a flight to safety when normal payment rails cut you off or make it difficult for you to keep on as you were.

(Note: I’m not advocating for people to evade sanctions using crypto, just sincerely asking why it isn’t happening.)

Evading sanctions would seem to be a perfect use case for this, no? And yet this doesn't seem to be happening on any appreciable scale. The U.S. government has even gone out of its way to say this isn’t happening. Todd Conklin at the U.S. Treasury Department recently told TRM Labs' Ari Redbord in a webinar that crypto isn’t being used as a tool to evade sanctions, at least not in Russia at this time.

The Financial Crimes Enforcement Network (FinCEN), the Treasury Department’s money-laundering watchdog, supported that view yesterday by publishing a statement warning that while individuals might turn to cryptocurrencies to bypass sanctions, the Russian government doing so “is not necessarily practicable.”

Part of that is because the industry just doesn’t have sufficient liquidity to meet the needs of a sovereign nation, Redbord later told me.

For a country, that would be hundreds of billions of dollars. The entire crypto market cap is about $2 trillion.

Furthermore, the Russian government has put precisely zero effort into creating the necessary infrastructure to operate a crypto-based alternative to its current dollar economy. (In fact, the Russian central bank appears to have kept quite a bit of its war chest in dollars in offshore accounts that have now been seized.)

I’ve written about this before (a few times now). There are any number of reasons why crypto doesn’t fill the sanctions-shaped hole in Russia’s economy.

But what if we look to individuals, such as, say, the dozens of Russian oligarchs who now find themselves on the Treasury Department's Office of Foreign Asset Control's Specially Designated Nationals list? Surely, they will be turning to crypto to evade sanctions; ri–no, wait, it seems that they, too, are not using crypto in any appreciable scale at this time.

Certainly, we saw a spike in ruble-bitcoin trading pairs on crypto platforms operating in Russia immediately after the invasion was announced, but volatility in that corner of the market seems to have calmed down (relatively speaking) over the last week or so.

(CoinDesk Research)
(CoinDesk Research)

It is, of course, certainly possible that these oligarchs might be using over-the-counter trading desks or other trading pairs (especially plausible if their wealth is held in assets that aren’t the ruble).

A quick look at the bitcoin-ruble price change shows why that might make sense.

(CoinDesk Research)
(CoinDesk Research)
(CoinDesk Research)
(CoinDesk Research)

The ruble’s value has plummeted compared with other currencies since the start of the invasion. One U.S. dollar was worth around 84 rubles the night the invasion began, according to TradingView. As of Monday night, it was worth around 131 rubles, down from 154 rubles earlier in the day. So what the charts above are really telling us is that the ruble isn’t worth a lot now.

The irony here is this will probably affect everyday Russian residents more than the oligarchs (like how Visa/Mastercard/American Express/PayPal’s cutting off Russia will likely affect everyday residents more than the oligarchs).

And despite that, it seems clear that oligarchs aren’t fleeing the ruble for bitcoin.

“We’re not seeing the large types of inflows we would see that would be indicative of inflows of large amounts of money that would correspond to a significant amount of an oligarch’s net worth,” said Salman Banaei, head of public policy at Chainalysis.

That doesn’t mean these individuals or their families might not turn to crypto in the future. Redbord said the sanctioned oligarchs are likely to use every tool they can to try to hold onto their wealth, which is being seized around the world.

"We've seen sort of shell companies and different complex laundering schemes over the years," Redbord said. "They will use absolutely everything that they can and crypto will be part of that playbook, at least in some small way."

Banaei said he would look for inflows into privacy-enhanced cryptocurrencies like montero or wallet addresses tied to exchanges with weak know-your-customer enforcement as some possible signs that people might be trying to evade enforcement officials.

The chief way to track fund movements would be to link addresses to individuals directly, Redbord said.

To be sure, crypto has been used to great effect as a fundraiser for the Ukrainian government. So far, $60 million worth of crypto has been donated over the past couple weeks. Those funds are being converted into fiat or being accepted as payment by some vendors, according to a government official.

The official, Deputy Minister for Digital Transformation Alex Bornyakov, told 3,200-plus listeners in a Twitter Space yesterday that the crypto donations are coming in faster than fiat donations (literally faster, as in they take less time to process than interbank transactions). Still, fiat donations have far outpaced crypto – $280 million-$300 million versus the $60 million in crypto.

Still, it feels like we've crossed the Rubicon. It's felt like that for a while, since last year's infrastructure bill, really, but we're now in a moment where crypto is being used as a key tool in an international war. Lawmakers are repeatedly asking if the aggressor can use crypto to bypass the economic warfare being used to convince Russia to stand down. Finance ministers in different countries are saying they need to have a contingency plan in case that happens.

The White House has suddenly revealed it's going to finally announce the long-awaited executive order on crypto regulation.

For many, many reasons, it feels like this is crypto's moment (yes, I’ve written this before, too). Either the sector can meet it and validate its existence amid the massive shifts in how the world sees the status quo financial system, or it can't, and those who say the industry is nothing more than a glorified casino for the 21st century have another example to point to.

Or, in the words of the great Joe Weisenthal:

A shout-out to CoinDesk Research's Edward Oosterban and Sage Young for the charts and data in today’s newsletter.

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)

We continue to wait for votes on the Fed board nominees.


  • Ukraine Is Buying Bulletproof Vests and Night-Vision Goggles Using Crypto: CoinDesk’s Amitoj Singh spoke to Bornyakov, the Ukrainian deputy digital minister, about just how Ukraine is spending the crypto it has received in donations. The full list includes bulletproof vests, night vision goggles, medical supplies and rations.
  • US Tax Agency Moves to Dismiss Lawsuit by Tezos Stakers Who Refused Refund, Demanded Trial: Remember that whole hullabaloo a few weeks ago about how the Internal Revenue Service offered a couple who paid taxes on tezos earned via staking a refund? The couple said they refused and wanted to bring the case to trial to force a judicial ruling that could set some kind of precedent. The IRS filed a motion to dismiss, saying that the refund went through and can’t be refused and that the suit shouldn’t continue.
  • On Chinese Social Media, Justin Sun Says He Hopes to 'Strengthen Cooperation' With Russia: Justin Sun, the Tron founder turned diplomat, tweeted about donating to Ukraine in English in the early days of the invasion. On his Chinese social media feeds, he also spoke about strengthening cooperation with Russia in a post noticeably absent on his English feeds. Sandali Handagama runs through the discrepancy and what some of Sun’s followers had to say.

Outside CoinDesk:

  • (The Washington Post) Treasury Undersecretary for Domestic Finance Nellie Liang wrote an op-ed on stablecoins for the Post, saying they “are not yet subject to consistent regulatory safeguards – meaning they pose an elevated risk to consumers” and reiterating that the President’s Working Group for Financial Markets recommended that Congress take action.
  • (Business Insider) Yacht seizures pursuant to sanctions could lead to headaches for their crews in that the oligarchs who own these vessels may not be able to pay the crews as their other assets are also likely to be frozen.

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.