There have been numerous news pieces detailing several countries using cryptocurrencies as tools to avoid sanctions imposed by other countries.
Most of these countries are suffering from US or EU sanctions, therefore, it’s understandable that their main goal of avoiding them is to somehow fill up on these strong currencies to support their own ones.
Such cases can be found with countries like Venezuela, Cuba, Russia and even Iran. All four of these countries have been delving in the cryptocurrency world in order to find ways of diversifying the economy or simply having unopposed access to the global markets.
What US sanctions usually target
In most cases, economic sanctions, be they imposed by the United States or any other country for that matter try to target the victim country’s repositories of the imposters’ currency. Naturally, in order for the sanctions to somehow work the imposter’s currency needs to be in high demand not only in the victim country’s economy but also in the global markets as well.
US sanctions are the primary focus because we all know that the USD is the biggest currency in the world, and by the biggest I mean the most used one.
Preventing the circulation of USD
One of the examples of the United States sanctions preventing USD transactions in the country is Venezuela, which was forced to convert its airport taxes into cryptocurrencies, distribute them across several crypto exchanges around the world and acquire USD through that, which is like a classic method of avoiding an authority’s watchful eye in the history of crypto trading all over the world.
Naturally, this comes with a serious issue in terms of exchange rates and the fees as well, but it seems to be the only route Venezuela could have taken.
The US is not the only country with this power
Different regions have different geo-political situations and therefore, the USD may not be the only currency playing a major role.
Let’s take the Caucasus region as an example. Most of the countries located there are very responsive to the financial movements of the Russian Federation. Given the fact that all of the Caucasus nations are very serious trade partners with Russia, having that partnership come under fire would directly impact the local economy.
The case with Georgia
One of the most recent cases is the Russia-Georgia drama, where Russia was threatening to prevent financial transactions between the countries. Judging by the fact that Georgia receives quite a lot of payments via the RUB it would be a complete disaster for their local currency, which is still depreciating like crazy relative to the dollar.
One thing that needs to be considered is that exports and payments aren’t done by the government, it’s a compilation of various private companies doing business with each other. Therefore it’s never guaranteed if any of the sides support the sanctions. Should they be given the opportunity to resume business ventures, they’ll always take it.
Having something like a decentralized currency which has no effect on the currency correlations more or less, would allow these private companies to continue their partnerships without any serious issues.
Although it wouldn’t shore up the currency depreciation issues completely, it would still play a major role in maintaining it to a manageable level.
Does the hunter become the hunted?
Now that we’ve discussed a large country influencing another through sanctions, let’s discuss big ones influencing each other.
It’s no secret that Russia faces serious US sanctions thanks to which the economic growth has been relatively slow in recent years. However, now that the government has warmed itself up to cryptocurrencies a bit, it’s possible to somehow avoid these issues without “interfering” with the sanctions and warranting a response from the issuer.
As already mentioned, the sanctions are mostly used to prevent the currency movements so that the “victim’s” economy is directly affected. However, the use of cryptocurrencies does not directly “violate” the terms of those sanctions, therefore leaving the issuer emptyhanded in terms of a legitimate intervention.
This case can be associated with the recent request from a Russian arms company to conduct business using Bitcoin and various other cryptocurrency transactions.
Based on the fact that Russia will take any opportunity to avoid US sanctions it will most likely be approved, but what will the message be?
The message will be that there are alternative methods to acquire United States Dollars and that sanctions are not as effective as they used to be.
Another part would be the engagement of a Russia-registered company in an industry that The US directly opposes and has considered in the sanctions, and basically the loss of control over their own restrictions.
There is no clear method for the USA to respond to such a development when it’s clearly not a “breach” of the sanction “guidelines”. Should the intervention be challenged by a third party country, it would be immediately deemed as illegal and the manipulation of another country’s economic policy, something which the USA has been accusing Russia for pretty much decades now.
Should they fall for such an accusation, they’d lose quite a lot of political power due to their hypocrisy.
Cryptos are a perfect weapon against sanctions
Sanctions also tend to target the most profitable industries in the victim country’s economy. For example, the oil industry in Iran has been a constant target of US sanctions, but the country’s recent acceptance of crypto mining as a legitimate industry was a direct challenge to those sanctions.
Why? Because it’s Iran’s attempt at diversifying their economy. Naturally, mining would probably not be as profitable as oil drilling for quite a while still, but it’s a start.
Should the united states dare to oppose this legislation, through the argument that it’s a breach in the sanctions, they’d be immediately countered.
The counter-argument would most definitely be that it is a private sector and that it’s dealing with decentralized assets that have nothing to do with the Iranian government.
And should the US have any gripe with the mining companies, it would simply be seen as an illegal intervention in a private venture’s business proceedings, painting the US as nothing more than a bully.
Although this article has turned out like a jab at US sanctions, it shouldn’t be perceived as such. The US was just a perfect example simply based on the fact of how many countries they’ve imposed sanctions upon.
The only thing that should be understood from the article is that cryptocurrencies have the capability of circumventing sanctions in a legal manner while leaving the issuer with very few choices in terms of responding and not losing political power in the process.