Can Moscow Use Crypto to Evade Western Sanctions? Venezuela and El Salvador Might Have an Answer

• Western sanctions are having an impact on Russia, with the country's national wealth fund having halved after it invaded Ukraine.
• Venezuela is planning to restart its crypto projects, as both Nicolas Maduro and Maria Corina Machado (opposition member) sing Bitcoin's praises.
• El Salvador's Bitcoin plan hasn't significantly impacted' the country's economy, according to the Financial Task Force of Latin America (GAFILAT).
• It's unlikely that crypto could help Moscow evade the Western sanctions at the moment.

According to a report by Sweden's government, Russia's national wealth fund has halved since it invaded Ukraine. Unemployment is also abysmally high, with some reports stating that imprisonment has been replaced with forced labor.

The report also claims the Kremlin is spending $1.5B/year in informational warfare, some of which focuses on swaying the public's opinion regarding the impact of Western sanctions.

President Vladimir Putin and his authoritarian regime are peddling the false narrative that the Russian economy is strong, and that its war machine is unharmed by western sanctions. This is a lie that must be rebutted.Swedish Ministry of Finance

If the sanctions have hurt Russia, is there a way to avoid them? El Salvador and Venezuela might offer an answer - crypto.

Let's discuss how crypto could play a role in Moscow's plan to evade Western sanctions.

What's Venezuela Doing With Crypto?

During the latest Venezuelan elections, opposition leader Maria Corina Machado proposed a Bitcoin reserve (while also contesting Nicolas Maduro's election victory).

In an interview with Alex Gladstein (Human Rights Foundation CSO), Machado claims Bitcoin helped many Venezuelans protect their wealth.

Maduro also hinted at a pro-crypto approach going forward, saying the country needs to get back' on the crypto path.

Let's talk about the world of cryptocurrencies. We started that path and have to get back on it because a group of bandits and thieves destroyed the path of cryptocurrencies, but we will get back on it.Nicolas Maduro

He did not mention the Petro, which is Venezuela's national cryptocurrency. Last we heard from it in January, it was nearly liquidated.

Why Is Venezuela Heading Toward Crypto?

Venezuela's national debt is upward of $150B, and inflation was at 190% in 2023. The current president,' Nicolas Maduro, is also a wanted narco-terrorist, with the US offering a reward of up to $15M for his arrest.

International sanctions, the COVID-19 pandemic, and the increasing anti-democratic measures taken by Maduro (like restricting internet access) have further isolated the country economically.

If this sounds familiar, that's because it is. Russia is in a similar situation with the Western sanctions.Can Crypto Help Russia? El Salvador Shows It's Unlikely

Russia started crypto payment trials on September 1 in an attempt to circumvent Western sanctions and stabilize the economy.

If the trials succeed, Russia will launch two crypto trading platforms.

But will this be worth it? El Salvador shows it might be, though only in the long run. The country still has limited Bitcoin adoption even after three years.

The IMF recently reported that its fears regarding El Salvador's Bitcoin plan haven't come to pass. This means the country hasn't wrecked its economy by adopting $BTC. However, it has failed to improve it significantly.

The Financial Task Force of Latin America (GAFILAT) assessed El Salvador's compliance with international anti-money laundering requirements.

They found that Bitcoin didn't have a significant impact' on the country since its 2021 adoption. Only $6.6M operations related to $BTC have entered the financial system in the assessed period. This is less than 0.1% of all assets controlled by El Salvador banks.

The country remains confident in Bitcoin's potential, but so far, it hasn't had a significant impact on its economy.

Given this, will it be any different for Russia? According to all available data, that's unlikely.

El Salvador isn't the target of worldwide economic sanctions, yet Bitcoin has barely helped its economy. Russia is in the economic crosshairs of the entire Western world, which would undoubtedly complicate crypto adoption.

In the long term, Bitcoin might help Russia's economy recover. But short or even mid-term, it's very unlikely. However, it's still worth trying, as any economic improvement is better than nothing.

Our Verdict - Bitcoin Might Not Be Moscow's Salvation

Crypto is a giant industry; there's no doubt about that. And it's constantly developing, creating new use cases (like the Lightning Network) and bringing decentralized finance to people.

Given enough time, resources, and international cooperation, Russia would certainly benefit by adopting crypto. But sadly, those are the three things the country is missing at the moment.

So, can Moscow use crypto to evade Western sanctions? Unlikely at the moment. But the exact details remain to be seen.

ReferencesClick to expand and view references

• Russia is lying about its economic strength: sanctions are working - and we need more" (Swedish Government)
• Maria Corina Machado quiere el Bitcoin en Venezuela. Entrevista con subtitulos en espanol (YouTube)
• Venezuela: Prospects for Restructuring Sovereign Debt and Rebuilding a National Economy Against the Backdrop of a Failing State (Faculty of Law)
• Nicolas Maduro Moros - New Target (US Department of State)
• Informe de Evaluacion Mutua de El Salvador (GAFILAT)

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