Sanctions threaten to cripple Russia's multibillion-dollar crypto industry

cnbc.com:

Sanctions imposed on Russia over the country's unprovoked invasion of Ukraine could hamper the growth of its multibillion-dollar crypto sector, according to experts.

This week, U.S. officials targeted Russian bitcoin mining firm BitRiver in its latest round of sanctions aimed at hurting Russia's economy. The Treasury Department's Office of Foreign Assets Control says it is concerned Russia may monetize its vast oil reserves and other natural resources for power-intensive crypto mining as a way to raise funds and get around western sanctions.

«This is a powerful signal from OFAC that it will use every tool in its arsenal to prevent Russia from evading sanctions through crypto,» David Carlisle, vice president of policy and regulatory affairs at crypto compliance firm Elliptic, said in an emailed note.

The sanctions will cripple BitRiver and its various subsidiaries, blocking them from accessing U.S. crypto exchanges or mining equipment. Crypto mining — the process of validating new digital currency transactions — requires specialized computers that consume lots of energy.

The move shows U.S. officials are «deeply concerned that Russia could leverage its natural resources to conduct crypto mining to evade sanctions,» something Iran and North Korea have been known to engage in the past, Carlisle said.

The potential exploitation of bitcoin production for Russian sanctions evasion remains a key concern for global regulators, including the International Monetary Fund.

«Crypto mining, while nowhere near a replacement for the assets frozen by Russian sanctions, avoids the fiat-to-crypto 'on-ramps' and crypto-to-fiat 'off-ramps' at centralized virtual currency exchanges, thereby bypassing sanctions screening,» said Anand Sithian,