With global sanctions hitting Putin-aligned Russian oligarchs and their troves of ill-gotten gains, there's been speculation that these billionaires will hide their assets in cryptocurrency -- a suspicion perhaps heightened by the fact that some crypto firms are refusing to shut down access by Russians to their exchange platforms.
How realistic a concern is this, and how should governments respond? I put those questions to Bill Maurer, Director at the Institute for Money, Technology and Financial Inclusion at UC Irvine, and one of the world's foremost experts on alternative/experimental forms of money and finance:
"If you look at real-time transactions right now on fiatleak, you'll see that most of the trading between rubles and crypto is to Tether, a stablecoin that markets itself as fully backed by US dollars," he tells me. "That would represent a flight to stability, in contrast to, say, buying Bitcoin. It's also interesting since there's been a lot of speculation about what the war will do to the price of Bitcoin -- and my answer is, within the current pattern of trading, probably not much.
"Tether, meanwhile, is controlled by Bitfinex, a company that has moved around from tax haven to tax haven (from the British Virgin Islands to Switzerland), with questions about whether the reserves actually exist and where the reserves are really held. Pity the poor oligarch who is drawn to a stablecoin whose value may be based on nothing but thin air. Not."
The problem for oligarchs, he goes on, is that moving their fiat money to crypto means they'll have to keep it as crypto:
"[B]uying crypto to evade sanctions will only work for as long as one is willing to keep the funds in cryptocurrency and not exchange back out again into a fiat currency," as he puts it.
"It's like buying, well, a yacht and just parking it somewhere. Everyone can see it, too-- just like a yacht: it's not really anonymous, since most cryptocurrencies are recorded public blockchains; you can't see the identity of a Bitcoin holder, say, but you can see the addresses into which transactions are made--and a very large, multimillion dollar transaction will catch any financial crimes enforcement investigator's eye!"
In fact, this has been done very recently, exposing Bitcoin's presumption of anonymity to be bogus:
"The US federal authorities have demonstrated with the Colonial Pipeline ransomware attack that they could triangulate from publicly available blockchain data to get close enough to the perpetrators to seize the Bitcoin linked to their addresses. Remember that the Colonial Pipeline attack was conducted by Russian hackers. So if if you're an oligarch, turning to Russian hackers to help you evade sanctions: buyer beware!"
Senator Elizabeth Warren is drafting a bill to block Russians from making transactions on crypto services, and Bill has advice for her and other government regulators:
"Any time people are taking moving between crypto and state-issued currency, there are already checks in place; they might need to be strengthened. But we might need the regulators to look more closely at crypto-to-crypto exchanges, too, since those might plausibly be used to evade sanctions. Also, we need the sanctions to have long memories, so to speak, otherwise you might have a situation where someone parks assets in crypto to avoid seizure, and then cashes it out years later."
More background from Bill in an interview I did with him in 2011, aptly titled: Bitcoin Can't Be Free From The Powers That Be Because It Rides On Rails That They Control.
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