Will Russians use crypto to bust the sanctions?

The financial strictures imposed on Russia have put a spotlight on cryptocurrencies. Could the Russian government, or sanctioned officials, use digital assets to hide and move their wealth, undermining efforts to punish President Vladimir Putin’s regime for its bloody war in Ukraine?
Here’s where things stand: Global illicit crypto activity amounted to $14 billion in 2021 — or about 0.015% of global gross domestic product — according to analytics firm Chainalysis. Russia’s exports amounted to more than $500 billion in 2021, a volume of transactions that far exceeds what even the largest and most liquid cryptocurrencies, such as Bitcoin, can handle. Also, activity on most blockchains leaves a permanent public record. Any significant state-driven sanctions-busting would immediately stand out, alerting authorities and threatening undesirable consequences for all involved.
That said, there’s still room for smaller-scale evasion. Suppose, for example, a sanctioned Russian wanted to move a few million dollars’ worth of rubles out of the country. He’d need to buy digital assets in Russia, then eventually sell those assets for fiat currency usable in the country where the funds needed to go — all without authorities knowing whose money it actually was.
The first step would be easy: convert rubles to crypto at one of several accommodating exchanges that operate in Moscow.
The next step would be to further obscure where the funds came from, perhaps through the fast-growing market for nonfungible tokens, where exchanges aren’t required to identify users or report suspicious activity. Once the funds looked legitimate enough, they could be converted into dollars at an established crypto exchange and deposited in the account of an entity that the sanctioned individual secretly controlled.
Such laundering, however, entails considerable risk. Unlike a banknote, a crypto token retains the digital fingerprints of everyone who has ever held it. Although each of those holders is identified only by an alphanumeric address, law-enforcement agencies — with the help of increasingly cooperative exchanges — are constantly improving their ability to recognise crime-related addresses and connect them to individuals. This allows authorities to confiscate stolen funds and nab people even years after the fact.
In Russia’s case, authorities have already taken steps to confound would-be sanctions evaders. The US Treasury Department has cracked down on two exchanges — Suex and Chatex — popular among money launderers, along with a long list of associated addresses.

—Bloomberg