Western sanctions on Russia threaten to cripple the cryptocurrency industry in the country which is the world’s third-largest bitcoin mining hub, with an estimated value of billions of dollars.
US officials are concerned that Russia may “invest its natural resources” in order to increase crypto-mining to evade sanctions.
The United States this week targeted Russian bitcoin miner BitRiver in the latest round of sanctions aimed at hurting the Russian economy.
The US Treasury’s Office of Foreign Assets Control says it is concerned that Russia may invest its vast oil reserves and other natural resources in order to mine cryptocurrency as a way to raise funds and circumvent Western sanctions.
“This is a strong signal from OFAC that it will use every tool in its arsenal to prevent Russia from evading sanctions through crypto,” David Carlisle, vice president for policy and regulatory affairs at cryptocurrency firm Elliptic, told CNBC.
Western sanctions will paralyze BitRiver and its affiliates and prevent them from accessing US cryptocurrency exchanges or mining equipment.
Cryptocurrency mining requires specialized computers that consume a lot of power.
Carlyle says the move shows that US officials are “extremely concerned that Russia could take advantage of its natural resources to conduct crypto mining to evade sanctions”, something Iran and North Korea have previously been notorious for.
Russia is a huge cryptocurrency market, with the Kremlin estimating that Russians own nearly 10 trillion rubles ($124 billion) in digital assets.
CNBC says there is mounting evidence that Russians are turning to cryptocurrencies as an alternative to the ruble, which is starting to collapse as a result of Russia’s economic isolation.
Russia announced last afternoon that it was considering accepting Bitcoin in exchange for its oil and gas exports in the face of tough sanctions imposed by Western countries on Moscow in response to its invasion of Ukraine.
Western countries have imposed heavy sanctions on Moscow since it began its invasion of Ukraine. Westerners froze about $300 billion of Russian reserves held abroad.