Interaction between cryptocurrencies and the Ukrainian-Russian war?

It has been more than two months since the Ukrainian-Russian war started, and it has a huge impact on the world. Given that Russia is one of the world's largest oil and gas exporters, the war between the two countries has brought risks to the global energy supply, and international oil prices have risen. The highest since 2008; in addition, more and more countries have also imposed sanctions on Russia, covering trade, finance, aviation, transportation, military, science and technology, sports... international sanctions in many fields.

But this kind of sanctioning activities, the most attention is the financial flow sanctions against Russia, which makes Russia's cross-border transfer payment disconnected, and even further arouses everyone's attention to cryptocurrencies. Next, Mark will introduce This is a relevant issue in this war, starting with Russia's expulsion from the SWIFT payment system.

(ㄧ) Russia was expelled from the global financial system

SWIFT is the abbreviation of "Society for Worldwide Interbank Financial Telecommunication" (Society for Worldwide Interbank Financial Telecommunication), which is composed of more than 10,000 banks around the world. The communication system is the most credible international payment system in the world.

After European and American countries announced to expel some Russian banks from the SWIFT payment system on February 26, 2022, the Russian ruble began to depreciate as expected, forcing the central bank of Russia to sharply raise the benchmark interest rate to 20%. A series of emergency measures, including banking restrictions, prevented the ruble from continuing to collapse and inflation accelerated.

However, the use of SWIFT as a punitive tool may have limited effect. A total of 7 Russian banks were expelled from the sanctions, but the two key banks, the Federal Bank of Russia, and the gas industry bank related to energy trade were not included in the sanctions. was greatly reduced, highlighting that SWIFT has not stepped on a real pain point in Russia.

(2) Russia has already laid out countermeasures?

For Russia, although the SWIFT sanctions imposed by the United States and European countries this time are unprecedented, they are also expected. Russia has already laid out relevant measures, namely:

• Launched the local version of the Financial Information Transmission System (SPFS)
  As early as 2014, when it invaded Crimea, Russia realized that it could not rely too much on organizations led by American forces, and would eventually be sanctioned by European and American countries, so it tried to set up its own financial information transmission system (SPFS) to conduct transnational financial transactions. Circulation and payment related business. At present, about 400 banks in Russia have joined, but there are only more than 10 foreign financial institutions, so whether it can play a role still depends on whether foreign financial institutions join in the future.
• Reducing the U.S. dollar containment <br class="smart">Beginning in 2018, Russia has greatly increased its foreign exchange reserves in RMB and euros, and even cut its U.S. dollar reserves from nearly 45% to 16.4% in 2021, and increased trade with China. Since 2014 In 2008, Russia shifted its international trade focus to China year by year, and signed a number of energy contracts related to natural gas and crude oil.
• Consider emerging currencies - digital currencies and cryptocurrencies<br class="smart">As early as October 2020, the Russian central bank announced plans for digital rubles, in an attempt to use digital currencies to avoid the US dollar and the traditional financial system, even with the The cooperation of other countries surrounded by the United States in the electronic transaction of digital currencies is also used to accelerate the "de-dollarization".

(3) The role of cryptocurrencies in this war

The embodiment of the decentralized value of cryptocurrencies?

War and international sanctions have made emerging currencies, especially cryptocurrencies, a more convenient and safe-haven asset in times of war because they have the characteristics of breaking through the country's restrictions on the free transfer of assets and decentralization. For ordinary Russians living in soaring prices, and for Ukrainians who are constantly fleeing to avoid the war, cryptocurrencies have become an important tool to preserve the value of property in the war.

• Ukraine:
  At the start of the war, the Ukrainian central bank suspended electronic transfers, preventing Ukrainians from accessing foreign currency, a move that prompted Ukrainians to convert their wealth into cryptocurrencies. In addition to being convenient to carry, even if there is a rise or fall, it is better than the shrinking of the Ukrainian currency. Finally, the Ukrainian President signed a bill on 3/16 to allow cryptocurrencies that were originally operating in the legal gray area to be officially circulated legally in the country, while also allowing the establishment of public cryptocurrency exchanges.
• For Russia:
  In addition to the "digital ruble" promoted by the government, the international economic sanctions against Russia have caused the ruble to depreciate continuously. Trading volumes between Bitcoin, Tether and Ruble have surged.

The boycott of Russia’s use of cryptocurrencies continued to emerge. Although major Canadian currency exchanges initially believed that boycotting Russia would run counter to the core concept of cryptocurrencies, large trading platforms including Binance, Coinbase and others eventually compromised, banning more than 25,000 and cryptocurrencies. Russia-linked accounts trade cryptocurrencies on its platform. However, Binance also stated that the freezing will be sanctioned Russian personal accounts, and will not unilaterally block the accounts of millions of innocent users, otherwise it will be a blatant challenge to the meaning of encryption technology.

Although the price of cryptocurrencies has not soared due to the turmoil in the traditional asset market since the war of aggression against Ukraine, and it seems that it has not played the hedging function expected by investors, its participation in the war still has an epoch-making impact on the evolution of digital assets.

Will cryptocurrencies be a way for Russia to evade sanctions?

Although the participation of cryptocurrencies in the war has a certain degree of impact on the overall situation, at this stage, it is still difficult for Russia to evade sanctions. The main reasons are as follows:

• Cryptocurrency trading volume is not large enough <br class="smart">Russia's $650 billion foreign exchange reserve is frozen and unusable. The market volume of cryptocurrencies is not enough to make up for the funding gap in Russia, and even if Russia has a large number of cryptocurrencies, there are not so many buyers in the market to undertake.
• The transparent and open features of the blockchain make it easier to track <br class="smart">Bitcoin is built on the blockchain, and the concept of the blockchain is a public ledger, where all transactions can be viewed and queried . The CEO of Coinbase, the largest cryptocurrency trading platform in the United States, said that cryptocurrencies are easier to track down than cash and gold, and he does not think Russian dictators can use cryptocurrencies to evade sanctions.
• Virtual and physical exchanges are still subject to government supervision <br class="smart">Although virtual currency transactions are not regulated and restricted by governments of various countries, once virtual currency is converted into physical currency, virtual currency transactions are still required. Exchanges such as Binance, Coinbase, etc., which are still subject to US and European bans.

War Becomes a Milestone for Cryptocurrencies? - Countries speed up the legislation and regulation of cryptocurrencies

The war highlighted the value of cryptocurrencies: borderless, portable, decentralized, highly resistant to regulation, transparent and traceable, establishing Bitcoin as an important asset for risk diversification. These characteristics are helpful to both sides of the war, so Russia and Ukraine have accelerated the legislation and legalization of cryptocurrencies.

At present, the trading of cryptocurrencies is not very extensive. If you want to buy arms, you must sell cryptocurrencies and exchange them for dollars. If other various materials and commodities can be traded in cryptocurrency in the future without converting them into physical currency, then the current supervisory units can be said to be very difficult to control. Cryptocurrencies and blockchains are forming a unique way of operation under the decentralized architecture. The United States understands the importance of cryptocurrencies and accelerates legislation.

Although the value of cryptocurrencies is still being questioned, and many believe that cryptocurrencies will eventually go into a bubble, this war seems to prove the value of cryptocurrencies and will become an important trend and asset in the future.

(4) Mark's point of view

Some people say that financial technology has become another weapon in this war. In the past, the war was more than who had more nuclear warheads, but now because technology has caused financial globalization, a country's financial flow can be controlled by other countries or technology companies. , technology has brought new ways to traditional geopolitical warfare, and technological boycotts have become new sanctions tools. This not only impacts the regulatory policies of many countries, but also affects the global layout of many companies.

This actually explains that Taiwanese industries are quite sensitive to Chinese-funded investments. For example, Shopee’s application for electronic payment is due to the Ministry of Economic Affairs’ investment review committee revising the definition of a Chinese-funded enterprise and adopting “level-by-level identification”, causing Shopee to give up on increasing capital and avoid being subject to According to the new regulations, it is determined to be land-owned.

Mark believes that Taiwan still needs to gradually strengthen the development and cultivation of domestic related financial innovation, so as to have a chance to seize the opportunity in the future global layout of financial technology. At present, Taiwan's competent authorities prefer to let the large-scale financial industry lead the pace of innovation. But compared with international development, it seems to be a bit conservative.