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Cryptocurrencies, collateral victims of sanctions against Russia?

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Will the war in Ukraine sign the end of the recess for cryptocurrencies? Perceived as a means of circumventing the economic sanctions taken by developed countries against Russia, cryptocurrencies are in the sights of the largest financial institutions on the planet.

This Wednesday, March 2, the G7 and the European Central Bank took turns to announce that everything would be done to prevent cryptocurrencies from being used to evade sanctions. “We will study all available means”, added the Minister of the Economy, Bruno Le Maire, without specifying the technical modalities that this control could take.

→ EXPLANATION. How Russia is trying to limit the scope of Western sanctions

In these troubled times, it seems that cryptocurrencies act as a safe haven for Russians, but also for Ukrainians anxious to protect their money from the turbulence. After falling during the first days of the conflict, due to the uncertainties linked to the crisis, bitcoin soared again last week, to flirt for a few days with 40,000 dollars (far from its all-time high at $60,000 last November).

Operational alternative

The phenomenon would be partly linked to the exclusion of many Russian banks from the Swift interbank payment system. “Within 48 hours of the announcement, global cryptocurrency capitalization grew from $1.6 trillion to $1.95 trillion. And for good reason, the blockchain offers a real operational alternative for doing business.” says Karl Toussaint du Wast, co-founder of NetInvestissement.

In principle, it is impossible to know the identity of the authors of these transactions, the blockchain operating completely anonymously. According to the French start-up Kaiko, which centralizes data from multiple marketplaces, these movements are mainly due to small investors, and a few larger traders.. But Western governments fear that they are also the work of Russian oligarchs or companies, trying to evade the sanctions aimed at them.

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Faced with these more or less massive movements, what are the authorities’ real means of action? “What is certain is that it is by nature very complicated to regulate cryptocurrencies which, by their construction, escape the control of governments”, says Nathalie Janson, professor at the Rouen Business School.

Regulate the platforms rather than the blockchain

Among the possible means of action, that of regulating not the blockchain, which operates anonymously, with pseudonyms (users are identifiable by key systems, but are never linked to identities), but the platforms of access to these cryptocurrencies, which notably allow them to be converted into classic fiduciary currencies.

“In recent years, the regulation of these platforms has already changed a lot: many Western countries such as France have made these platforms subject to identity verification obligations on the model of what exists when opening a bank account. », says Nathalie Janson.

With the Pacte law of 2019, France has indeed taken a lead on these subjects, since it has established the status of service provider on digital assets (PSAN), which ensures the supervision of players registered by financial regulators. (AMF and ACPR). It is also on the basis of this regulation that the European Union has been working since 2020 on the MiCA (Markets in Crypto Assets) legislation, the objective of which is to better protect consumers and identify illegal users of platforms.

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Great traceability

By forcing the platforms to communicate the identity of the account holders (the famous “wallets” in the jargon), it will be a priori easier to trace the operations and trace any illegal traffic. “Contrary to what one might imagine, this is also one of the interests of the blockchain which, unlike cash transactions for example, makes it possible to trace all operations”, says computer scientist and mathematician Jean-Paul Delahaye.

In 2021, the group of cybercriminals DarkSide was thus spotted by the American authorities after having hacked the oil pipelines of the Colonial Pipeline group and extracted a ransom of more than 4 billion dollars from the American giant. “Today, it is actually increasingly difficult to move very large sums of money through the blockchain, because regulators monitor the platforms, especially when cryptocurrencies are transformed into common currency”, adds Jean-Paul Delahaye.

“The problem is that there will always be states that refuse to submit their platform to regulation, or platforms that refuse to follow regulation. And in the face of this, States will always be totally powerless. assures for his part Karl Toussaint du Wast. In any case, the more they are illegal and marginalized, the more difficult it will be to invest fortunes in them. Because the risk of entrusting your money to clandestine operators is also that it will disappear overnight, without any possibility of recourse.

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