The International Monetary Fund (IMF) has warned that Russia could mine Bitcoin and other cryptocurrencies to avoid the Western sanctions. Boosting mining industries in Russia could pave the way for the country to avoid the imposed sanctions.
IMF warns of crypto mining in Russia
The IMF released a new report in which it said that Russia could start mining cryptocurrencies to escape the economic sanctions imposed by the US and the EU. The institution said that Russia could switch towards alternative ways of sending money outside the traditional financial sector.
One of the examples used by the IMF is that Russia could partner with exchanges that are not fully regulated. The country could also switch towards concealing transactions through decentralized exchanges (DEXs) of mixers. The IMF referred to privacy coins such as Monero that could limit transaction tracking.
Russia has faced severe economic sanctions imposed by Western countries, and it is currently the most sanctioned country in the world, surpassing even North Korea. The IMF has argued that the energy resources in Russia that cannot be exported could be used to mine different cryptocurrencies.
“Over time, sanctioned countries could also allocate more resources toward evading sanctions through mining. Mining for energy-intensive blockchains like Bitcoin can allow countries to monetize energy resources, some of which cannot be exported due to sanctions,” the IMF said.
Crypto mining activities have significantly grown in other sanctioned countries like Venezuela, North Korea and Iran. However, the IMF said that the mining activities in sanctioned countries are “relatively contained”, but these activities are likely to grow.
“At this point, the share of mining in countries under sanctions and the overall size of mining revenues suggests that the magnitude of such flows is relatively contained, although risks to financial integrity remain,” the IMF added.
Increased scrutiny on crypto businesses
Cryptocurrency companies have faced increased scrutiny as regulators attempt to prevent any possible use of cryptocurrencies by sanctioning Russian individuals and institutions. Regulators in the US and the UK have asked companies to closely monitor transactions to ensure compliance with sanctions.
Despite growing concern over the increased use of cryptocurrencies in Russia, the Bank of Russia is against crypto mining and crypto transactions. In January this year, the Bank of Russia drafted a law proposing a ban on crypto mining activities.
On the other hand, President Vladimir Putin has been supportive of cryptocurrencies. He said that Russia could derive major benefits from crypto mining activities. Russia is also leaning towards positive crypto regulations and is considering Bitcoin for payments in oil and gas exports.
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