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  • A CIA analyst said the cryptocurrency market is too small for Russia to escape sanctions.
  • While oligarchs can actually transfer small amounts of money, blockchain technology can make such transactions traceable.
  • Russia has been hit by a wave of sanctions from Western powers for its invasion of Ukraine.

In a CNBC interview with industry experts and former CIA economic analysts, it was revealed that the cryptocurrency market is not a practical solution for Russia. However, exchanges must be on high alert for oligarchs and entities that may use cryptocurrencies to evade sanctions.

The cryptocurrency market is not big enough

CNBC interviewed industry players and experts to get their take on "Cryptocurrency Night in America" in order to understand the feasibility of Russia turning to the cryptocurrency market to offset losses from sanctions. The lineup included Alex Zerden of Capital Peak Strategies; Yaya Fanusie, a former CIA economic analyst; and Michelle Bond, CEO of the Digital Asset Market Association.

Former CIA analyst Yaya Fanusie noted that "the cryptocurrency market is not large enough" for Russia to escape or mitigate the impact of sanctions. Fanusie revealed that the real risk lies with sanctioned oligarchs and entities that may try to move money through the cryptocurrency market.

Michelle Bond noted that both the Treasury Department and the NSE have also come to the same conclusion that Russia cannot use cryptocurrencies to evade sanctions, contrary to concerns raised by Sen. Elizabeth Warren. Addressing the risks of cryptocurrency use by oligarchs, she said industry players are working with the government to ensure this does not happen by identifying "the assets of sanctioned individuals. Bond revealed that unlike fiat currencies, "cryptocurrencies can be monitored for illegal activity in a variety of ways."

As concerns grow, Ukraine and other parties are putting pressure on cryptocurrency exchanges to end their services to Russians. At the same time, Alex Zelden noted that when imposing sanctions, it is important to strike a "good balance" between pressuring Putin's government and hurting ordinary Russians who may oppose the war effort.

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Fanusie concluded the discussion by noting that there are currently concerns about China's support for Russia due to its stance on digital assets, but that it is unlikely to extend to cryptocurrencies. However, he said the concerns are more long-term, as most countries are currently under pressure not to cooperate with Russia.

Elizabeth Warren's concerns

Much of the recent conversation around Russia's possible use of cryptocurrencies to evade sanctions has been sparked by the activities of Elizabeth Warren. Warren is said to have drafted a bill to prevent Russia from evading cryptocurrency sanctions.

While Warren believes her new bill will "ensure that Putin and his cronies do not use cryptocurrencies to undermine our economic sanctions," the bill raises privacy concerns for the cryptocurrency community. The new bill's provisions may require information about the identity of private wallet holders.

Billy Markus, one of the founders of Dogcoin, tweeted a call to stop the senator from "using war to undermine innovation and destroy privacy. The need for such a bill has been questioned given that many institutions believe that using cryptocurrencies to evade sanctions is impractical for Russia.