As Russia’s war in Ukraine continues, cryptocurrencies are taking on an important role in the conflict, but not in the capacity of evading sanctions on Russian entities or oligarchs. On the contrary, crypto has proven itself to be very useful in supporting Ukraine as users around the world have donated over $56 million in cryptocurrency to addresses provided by the Ukrainian government alone.

This is “showcasing not just the crypto community’s generosity but also virtual assets’ unique utility for cross-border payments,” Chainalysis report on the matter reads.

As most readers know, the United States and many of its allies in the EU and elsewhere have taken unprecedented actions against Russia, including adding Russian oligarchs, their family members, and their businesses, as well as all major state-owned banks and many energy exporters, to the Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals And Blocked Persons List (SDN).

Western powers have also removed select Russian banks from the SWIFT system, essentially cutting them off from the global financial system, and sanctioned Russia’s central bank, preventing it from using its $650 billion in reserves to mitigate the impact of the sanctions.

There’s no evidence sanctions evasion is happening

Many are now wondering how Russia’s business and political elites could use cryptocurrency, such as bitcoin (BTC) or ether (ETH), to evade sanctions. “While there’s no direct evidence this is happening, It’s a reasonable concern as Russia accounts for a disproportionate share of several categories of cryptocurrency-based crime, and is home to many cryptocurrency services that have been implicated in money laundering activity,” the report reads.

As Chainalysis co-founder Jonathan Levin explained while testifying before the U.S. Senate, if cryptocurrency-based sanctions evasion is happening, it would probably look more like typical money laundering activity, in which relatively small amounts of cryptocurrency are moved gradually to disparate cashout points, rather than all at once in huge transactions.

Chainalysis’ report goes on to list the different ways sanctions could be evaded and dismisses all of them.

First, if Russian crypto whales – wallets with more than $1 million worth of crypto – would try to move these funds, it would show. Between the start of the invasion and the 21st of March, Chainalysis tracked just over $62 million worth of cryptocurrency sent from Russia-based whales to other addresses, many of which are associated with OTC desks and exchanges, some of them high-risk.

“While spikes in this activity are common, Russian whale sending hit its highest levels in roughly eight months during the week of February 28 soon after the invasion, reaching $26.5 million. On-chain activity alone can’t tell us if these transfers constitute sanctions evasion, as we don’t know if the whale wallets are controlled by sanctioned individuals and entities,” the report reads.

Sbercoin to zero

Chainalysis also looked into the newly created cryptocurrency issued by Russia’s biggest bank Sberbank, which was put on the sanctions list at the beginning of the war. The Sbercoin, as it is named, had previously been announced in late 2020.

According to CoinMarketCap, Sbercoin has seen roughly $4.5 million in total transaction volume, all on one popular decentralized exchange. Sbercoin’s price has dropped over 90% since its launch and currently sits at $0.00003329 as of March 28, 2022, with a market cap of $113,089. Sbercoin is thus obviously not used for sanctions evasion.

Chainalysis also looked at other cryptocurrency services and usage typologies that could indicate sanctions evasion by Russian entities, but so far, on-chain indicators for these don’t show much out of the ordinary.

Russia has a large ecosystem of services, and it’s reasonable to expect that sanctioned Russian entities may try to use these services to evade sanctions by moving their wealth through them.

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