Senior executives at Ripple, a San Francisco-based payments company, have recently expressed their scepticism about the ability of Russia to bypass sanctions using crypto assets
Brad Garlinghouse, CEO of Ripple, said in a tweet that “there are factual reasons why crypto cannot be used widely by Russia to evade sanctions.”
Garlinghouse argues that there are incredibly strict know-your-customer (KYC) and anti-money laundering (AML) policies that are in place to make sure sanctioned companies and individuals aren’t circumventing the measures put in place by OFAC.
A division of the Department of the Treasury, OFAC administers and enforces US trade and economic sanctions.
“Exchanges, etc rely on banking partners to convert crypto to fiat, and these partners may lose their licenses if someone on the OFAC list slips through. To prevent this, KYC/AML policies are extremely strict,” Garlinghouse stated.
Asheesh Birla, an executive with RippleNet, which uses blockchain technology to make cross-border payments between banks and other financial institutions, spoke on this. Birla believes that centralized exchanges will present a liquidity challenge to Russia in addition to complying with OFAC laws.
If Russia decides to use crypto assets such as Bitcoin (BTC) to bypass sanctions, the liquidity of the crypto market would not be sufficient to meet the country’s foreign exchange (FX) needs.
“Russians conduct about $50 billion in FX transactions every day, according to the U.S. Treasury Department. Bitcoin’s volume ranges between about $20 and $50 billion a day, which makes it the largest crypto. Russia’s needs encompass more than Bitcoin!
“The number of Russian rubles you could send through Bitcoin on Binance in January 2022 was only approximately $200,000, as compared to $3.7 million when you used Bitcoin/US dollar and $2.9 million when you used Bitcoin/Euro on Bitstamp.
“Assuming that the Bitcoin/Ruble market is able to replenish liquidity immediately (very doubtful), you are nowhere near $50 billion a day if you send approximately $200k every minute. Bitcoin/Ruble has also averaged around $11 million in daily volume over the last month….” Birla said.