Cryptocurrencies appear to remain a small window for Russians

[NEW YORK] Russian investors appear to continue to conduct transactions in Bitcoin and other cryptocurrencies even with tightening sanctions.

While the overall flows appear to be relatively small, data from blockchain analytics firm Kaiko show that rouble-denominated Bitcoin trading volume rose Saturday (Mar 6) to its highest level this year. Meanwhile, the majority of the rouble-denominated crypto trading volume appears to be conducted with the Tether stablecoin, which claims to be backed one-to-one with fiat.

Rouble denominated Bitcoin trading pairs saw a higher growth by "magnitude" on Mar 5, according to Kaiko. The average trade size of Bitcoin rouble transaction on Binance hit a 10-month high of roughly US$580 on Feb 24, when Russia invaded Ukraine.

"Perhaps more Russian retail investors are looking to get out of fiat exposure altogether in favour of BTC," said Andrew Tu, business development manager of crypto algorithmic trading firm Efficient Frontier. "While technically, US dollar sanctions probably cannot be realistically applied to USDT holders, I imagine that some people are simply taking additional precautions."

The trading from Russia only counts as a fraction of the total volume of Bitcoin's globally. Bitcoin's average daily trading volume varies between US$20 billion to US$40 billion. On Mar 5, the total trading volume of BTC/RUB was about US$14.2 million, Kaiko said.

Only 3 global crypto exchanges, Binance, Yobit, and LocalBitcoins, offer rouble-denominated crypto trading pairs, according to Kaiko's newsletter dated on Mar 7.

While exchanges including Binance and Coinbase said that they would not ban ordinary Russians from using their service, there have been a growing effort to block users related the sanctioned individuals and entities. Coinbase, for example, reported that they blocked over 25,000 addresses related to the sanction list.

The efforts to cut off crypto as a sanctions workaround follow the sweeping penalties imposed on Russia by the US and its allies, including a move to bar some banks from the Swift messaging system that connects financial institutions worldwide. The moves also underscore the significant role that digital assets are playing in a conflict testing global security.

Paolo Ardoino, chief technology officer of USDT issuer Tether, said on Twitter on Mar 4 that USDT, as a centralised stablecoin, "has to comply with requirements of central authorities". BLOOMBERG