Published in El Pais, 9 March 2022.
The big news of course has been the invasion of Ukraine by Russian forces. The reaction from most of the world has been outright condemnation with heavy sanctions including the removal of Russian banks from the SWIFT payment system. These sanctions will do much harm to the Russian economy however it seems Vladimir Putin has anticipated this and will likely use cryptocurrency to soften the blow. Here is how he will do that.
Blockchains that use the Proof of Work system utilize computers to run the network in a process called mining, those who contribute are rewarded with the native coin, for example if you contribute to the Bitcoin blockchain you get Bitcoin and if you contribute to Ethereum you get Ethereum. A few months back the Russian president seemed to be endorsing state sponsored Bitcoin mining saying the country has enough excess energy to contribute to the network. With the oil pipelines being shut down due to sanctions they can redirect the oil to produce energy needed to run mining farms.
Ransomware is the process of locking individuals and companies out of their files and demanding a payment to unlock it. Individual victims usually pay from a few hundred to a thousand dollars but for corporations the ransom is usually in the millions. Most often the payment is done over Bitcoin or more recently the privacy focused cryptocurrency Monero. Russia is already home to more cybercriminals than anywhere else in the world, Putin can tap this network and give them a job. Such a practice is already done in North Korea, a country no strangers to dealing with sanctions.
Replacing SWIFT with Blockchain
Blockchain and crypto enthusiast has long claimed that the technology is the perfect candidate to replace SWIFT which is deemed slow and costly. Russian banks can look to fast track implementing blockchain payment platforms to continue the inflow of cash. While the technology can replace it, this is the least likely of the three to happen as it is unlikely companies developing such systems such as Ripple would be willing to cooperate with the Russian government to make this happen.
This does not mean these sanctions are worthless as crypto can only be used as a temporary band aid solution. Countries can pass laws making ransomware payments illegal and centralized crypto exchanges can work to find individuals attempting to use crypto to circumvent the rules. As for mining, that will likely be more difficult to combat but any income from such a project would be minimal compared to the damages caused by the sanctions. All we can hope is that these work arounds are not enough to keep the war going.