Is it easy to hide money in the crypto economy? The case of Russia

Armin Ahari (), Johannes Duong (), Jakob Hanzl (), Elsa Maria Lichtenegger (), Lukas Lobnik () and Andreas Timel ()
Additional contact information
Armin Ahari: Oesterreichische Nationalbank
Johannes Duong: Oesterreichische Nationalbank
Jakob Hanzl: Oesterreichische Nationalbank
Elsa Maria Lichtenegger: Oesterreichische Nationalbank
Lukas Lobnik: Oesterreichische Nationalbank
Andreas Timel: Oesterreichische Nationalbank, https://www.oenb.at

Focus on European Economic Integration, 2022, issue Q4/22, 71-89

Abstract: Russia’s stance on crypto assets has clearly changed since its invasion of Ukraine. Throughout 2021, the Bank of Russia was set on strictly regulating crypto activities, maybe even close to all-out banning them from Russian territory in an attempt to protect investors and to close down on criminal activities. Since the invasion of Ukraine, this has clearly changed, even drastically so. Russia is now considering permitting crypto mining, investment and also payment to some extent. To shed light on possible reasons for this paradigm change, our study examines the potential for sanction evasion through the crypto economy. We show examples of countries that have already developed methods of using the crypto economy to circumvent sanctions more or less successfully. In our work, we distinguish between wealth preservation and the search for alternative payment channels for trade as two central motivations for the circumvention of sanctions, taking a deeper look into the EU sanctions regime as well as crypto market liquidity. Based on real world examples, we derive three hypothetical methods for circumventing sanctions through the crypto economy, i.e. the direct peer-to-peer system, the intermediary model and the escrow model. All these methods have major weaknesses though, and especially in light of low crypto market liquidity, we come to the conclusion that, for the time being, the crypto economy does not seem to offer sufficient potential to governments or major oligarchs for circumventing sanctions on a large scale.

Keywords: sanctions; cryptocurrency; crypto assets; crypto economy; Russia (search for similar items in EconPapers)
JEL-codes: F51 G15 O30 O38 (search for similar items in EconPapers)
Date: 2022
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.oenb.at/dam/jcr:e5c5af39-daf7-4863-8e3 ... e-crypto-economy.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:onb:oenbfi:y:2022:i:q4/22:b:1

Ordering information: This journal article can be ordered from
Oesterreichische Nationalbank, Documentation Management and Communications Services, Otto-Wagner Platz 3, A-1090 Vienna, Austria

Access Statistics for this article

Focus on European Economic Integration is currently edited by Julia Wörz and Elisabeth Beckmann

More articles in Focus on European Economic Integration from Oesterreichische Nationalbank (Austrian Central Bank) P.O. Box 61, A-1011 Vienna, Austria. Contact information at EDIRC.
Bibliographic data for series maintained by Elisabeth Beckmann ().