The role of cryptocurrencies in conflict

The price of bitcoin has risen rapidly over the past period, which some analysts believe is due to a surge in expectations of demand for bitcoin among Russian citizens. However, according to recent data, this claim is not true. On March 3, ruble-denominated cryptocurrency transactions totaled just $34.1 million, about half the $70.7 million on February 24.

Citibank estimates that over the past week, actual bitcoin transaction volume in Russia has averaged only about 210 bitcoins per day, while the total daily volume is roughly between $20 billion and $40 billion. As such, Russian citizens affected by sanctions do not appear to be flocking to cryptocurrencies, suggesting that Bitcoin’s rise above $450 million over the past week has little to do with actual Russian purchases.

"The relatively small volume of deals in Russia so far suggests that price action has more to do with investors preparing for an expected uptick in Russian demand than Russia's own demand," said Citigroup analyst .

Although the rise in Bitcoin price does not appear to be related to Russia. But the role of cryptocurrencies in this conflict remains under scrutiny. Some analysts say that it is not difficult for the Russian government to use mining as a way to obtain Bitcoin. They can be turned into goods and services, or just cash. Reports suggest that G7 countries are looking into ways to stop Russia from using cryptocurrencies to evade sanctions. A number of other countries have also expressed concern that Russia could use cryptocurrencies to circumvent Western sanctions.

However, given the size of Russia’s economy and financial markets, it seems unlikely that cryptocurrencies will play a significant role in helping Russia evade sanctions.  one of the biggest proponents of banning cryptocurrencies from Russians and financial institutions is actually the Central Bank of Russia (CBR) itself. According to local news outlets, the CBR continues to stand by its proposal to ban the issuance, mining and circulation of cryptocurrencies in the Russian Federation. “The central bank currently supports the position previously announced and published on its official website,” said a CBR official.