Russian Flight to Cryptocurrency Hasn’t Happened, Analysis Shows

Russian flag, cryptocurrency

The narrative that Russians have been evading sanctions through cryptocurrency in the wake of its invasion of Ukraine may not be true, Bloomberg reported Thursday (March 3).

The world’s largest cryptocurrency, Bitcoin, was rallying on Monday – but the expected surge from Russian investors didn’t happen.

Despite the expectation, the blockchain data suggested the Russians haven’t been trading crypto on major exchanges.

The ruble-dominated crypto activity was sitting at just $34.1 million as of March 3, according to Chainalysis. This was a decrease from its recent $70.7 million on Feb. 24.

“This is a fraction of the volume that was seen during the all-time highs of Russian crypto trading volume reached May 2021,” said Madeleine Kennedy, senior director of communications at Chainalysis.

Citigroup also estimates that the annual Bitcoin buying from Russia was sitting at 210 BTC on average per day for the last week, as contrasted with the daily volume of between $20 billion and $40 billion.

Russians might still be trading on a peer-to-peer basis, but larger volumes will likely still be visible on the blockchain, which suggests the Bitcoin rally over the last week wasn’t much to do with Russia’s buying power.

According to Alexander Saunders, a Citi analyst, the Russian volumes “have been relatively small so far, suggesting that the price action is more due to investors positioning for an expected uptick in demand from Russia, rather than Russian demand itself.”

Read more: Amid War in Ukraine, Crypto Regulation Refocuses on the Dark Side of Digital Assets

PYMNTS wrote that Russia’s invasion has upended a prevailing argument about how to regulate cryptocurrency, in that lawmakers have been worried about the fear of Russians using crypto to get around the financial sanctions.

Fed Chair Jerome Powell has said that the idea merits looking into the need for congressional action on crypto.

He said there needs to be a regulatory framework to prevent, among other things, unbacked cryptos for being used to finance terrorists.