Regulation

The sanctions announced by United States President Joe Biden in response to Russia’s attack on Ukraine did not include cutting the country off from payments on the SWIFT system or cryptocurrency transfers.

In a Thursday announcement from the White House, Biden said the U.S. and its allies and partners would be enforcing sanctions aimed at imposing “devastating costs” on Russia due to “Putin’s war of choice against Ukraine.” The U.S. president announced that the country would sever its financial system from Russia’s largest bank, Sberbank, as well as impose “full blocking sanctions” on VTB Bank, Bank Otkritie, Sovcombank OJSC, Novikombank, and their subsidiaries. Biden also named several elite nationals who have “enriched themselves at the expense of the Russian state” as part of the penalties levied against Russia.

However, speaking to reporters on Thursday, Biden announced that the economic measures would not extend to cutting Russia off from the SWIFT network — a payments system used across the world — in response to European officials. Leaving this option available to Russians and seemingly being unable to block cryptocurrency transfers could reportedly mitigate the impact of any sanctions levied by the United States and its allies. 

According to a Thursday report from Bloomberg, Russian billionaires could potentially circumvent any U.S. sanctions by using crypto to buy goods and services and continue to make investments outside countries experiencing harsher economic impacts due to the invasion. Individuals in Iran were able to solicit crypto donations for flood victims in 2019 — while under U.S. sanctions — and Venezuela President Nicolás Maduro proposed a bill in 2020 aiming to use crypto to evade different sanctions imposed on the country.

“If a wealthy individual is concerned that their accounts may be frozen due to sanctions, they can simply hold their wealth in Bitcoin in order to be protected from such actions,” said Quantum Economics founder and CEO Mati Greenspan.

Dmytro Kuleba, the minister of foreign affairs of Ukraine, urged against Russia being allowed to continue to use the SWIFT network. President Biden said that the sanctions imposed on the five Russia banks “will have equal consequence, maybe more consequence than SWIFT” but cutting off the country from the network would be held “as an option” if necessary. Neither Biden nor Kuleba directly addressed the possible impact of crypto in evading sanctions.

Biden’s actions came following reports Russia had launched an invasion of Ukraine, bombing a military airport near the capital city of Kyiv and striking targets across the country with missiles. With the addition of U.S. troops sent to Germany and Poland in response to the attack, Biden seems to be going after Russia both economically and with a show of military force.

However, a New York Times report suggested sanctions may not have the impact for which the U.S. president is aiming.

“Russia has had a lot of time to think about this specific consequence,” said former federal prosecutor Michael Parker. “It would be naïve to think that they haven’t gamed out exactly this scenario.”

Related: Russia to seize retail deposits if sanctions go too far, official warns

The situation in Ukraine is still developing, but the financial impact of the attacks has reached crypto and traditional markets. The Bitcoin (BTC) price fell into the $34,000s on Feb. 24 amid news of the invasion but has since recovered to trade above $38,000 at the time of publication.