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Latest Russian Sanctions Round by the US Goes for Bitcoin Mining Company

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The US Treasury Department stated on Wednesday that it had broadened its list of sanctions to include firms and persons who are suspected of assisting Russia in evading the impact of economic sanctions placed on the country.

Treasury sources said the agency is now focusing on Russian commercial bank Transkapitalbank and a network of more than 40 people, including tycoon Konstantin Malofeyev, who they say helped the Kremlin avoid a wave of economic sanctions.

The Biden administration also stated it is tightening down on enterprises that help Russia monetize its exports and other natural resources, such as Bitriver, that operate in the virtual currency mining sector.

US sanctions the first Russian Bitcoin mining company

Since the war on February 24, the United States has implemented multiple rounds of sanctions. Sanctions have been imposed on the country’s top banks and lenders, as well as cryptocurrency exchanges. “Having operated in the Russian Federation economy’s technology sector,” Bitriver was labeled.

Bitriver claims to be the world’s largest provider of environmentally-friendly cryptocurrency mining, having been created in 2017. It boasts a 100-megawatt renewable energy data center in Bratsk, Siberia, with 75,000 miners.

According to the Treasury Department, the company sold mining capacity to overseas clients, allowing Russia to “monetize its natural resources.” It went on to say:

“Russia has a comparative advantage in crypto mining due to energy resources and a cold climate. However, mining companies rely on imported computer equipment and fiat payments, which makes them vulnerable to sanctions.”

Anti-industry lawmakers in the United States have been increasing their rhetoric, believing that the country exploits crypto assets to dodge sanctions.

The Treasury Department defined crypto transactions to be “deceptive or organized transactions or deals” that might be exploited in sanctions evasion just days after the invasion in February.

The International Monetary Fund (IMF) echoed this opinion this week, warning that nations such as Russia and Iran may utilize cryptocurrencies to circumvent sanctions.

However, economists and industry experts have slammed the idea that the country will turn to crypto to dodge sanctions.

Russia’s Crypto Regulation is Advancing But There is a Catch

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Russia’s Ministry of Finance is heading closer to finalizing the bill on the mining and circulation of digital assets. As per coverage by Kommersant, the bill contains a comprehensive regulatory framework and for the first time dealt with the mining aspect, at length. 

Kommersant revealed that the current version of the draft law of the Ministry of Finance “On digital currency”, prescribes the rules for trading and mining for such assets. The authenticity of the document was confirmed by two Kommersant sources close to the industry. The Ministry of Finance did not immediately provide a comment.

Coming back to its contents, the draft established a number of aspects such as the terminology associated with digital currency, the legal framework for its circulation, issues, and so forth. Additionally, the document introduces a large number of stringent requirements for identification, accounting, and certification.

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Russia's Crypto Regulation is Advancing But There is a Catch 2

Russia’s crypto bill might drive investors to the black market

Sources close to the industry sought to dispel the fear by saying that these requirements will not affect operations with cryptocurrency outside the Russian information infrastructure. However, Sergei Mendeleev, CEO of InDeFi Smart Bank raised questions about the interpretation of the latter aspect.

Citing an example of the tether website which states that “it does not have an obligated person, but Russian law enforcers believe that it is Tether LTD”.

Apart from that, the document allows only domestic legal entities to carry out the role of both operators. Foreign crypto exchanges, in order to obtain a license to operate in the Russian Federation, must create a business entity.

While many experts hailed the move, believing that the document would provide new opportunities for miners, looking for a way out of “the gray zone,” others, however, feel that this would instead push investors to the black market.

The concerns raised are valid to a certain extent as Russia is known for its high-profile illegal market which has hogged the limelight owing to the current geopolitical situation.

Last week, TronWeekly reported on how Russia’s most dreaded darknet market- Hydra, and a cryptocurrency exchange Garantex have come under US sanctions for their alleged role in ransomware activities. The US Treasury Dept teamed up with the FBI, and German Federal Criminal Police to shut down several Hydra servers in Germany, seizing $25 million worth of bitcoin.

Russia’s biggest darknet and crypto exchange suffers a major blow

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Russia’s most feared darknet market- Hydra and a cryptocurrency exchange Garantex are soon to be sanctioned by the United States Department of the Treasury’s Office of Foreign Assets Control for their alleged association with ransomware activities, as per an announcement.

In a press release published on the Treasury Department’s website, Secretary Janet Yellen said, the move against Hydra and Garantex would serve as a reminder to criminals that they can no longer hide on the darknet or their forums.

The U.S. government agency alleged Garantex in particular, saying that it had “willfully disregarded” Anti-Money Laundering and Combating the Financing of Terrorism requirements imposed by many regulators on digital currency exchanges. It further accused that the firm was run by individuals who showed “wanton disregard for regulations and compliance.”

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It is to be noted that cybercriminals allegedly linked to Russia are notoriously reputed for their several high-profile attacks around the world. Data from blockchain researchers confirmed that roughly 86% of illicit bitcoin received directly by Russian crypto exchanges in 2019 were traced back to Hydra, which the Treasury Department described as the world’s “largest and most prominent darknet market.”

Additionally, the new sanctions would prevent U.S. citizens from making or receiving “any contribution or provision of funds, goods, or services” to Hydra or Garantex, the Treasury said.

The US dismantle Russia’s largest darknet

The department said the sanctions, which prohibit U.S. transactions with Hydra and Garantex and seek to freeze any assets they may have under U.S. jurisdiction, are part of a global effort to disrupt the overall structure of malicious cybercrime services, drugs, and other illegal offerings, including ransomware activity, that arise out of Russia.

The Treasury worked in tandem with the U.S. Department of Justice, the FBI, and the German Federal Criminal Police, in shutting down several Hydra servers in Germany and seizing $25 million worth of bitcoin.

In September 2021, The U.S Treasury Department had imposed sanctions on Russia-based business Suex OTC for its alleged role in facilitating transactions for ransomware attacks. Since then agencies from the FBI to the Justice Department have been extra vigilant and set up task forces to enforce and investigate malicious actors using cryptocurrencies for illegal activities.

Sbercoin, Russia’s largest bank trills out its cryptocurrency

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Following the invasion of Ukraine, Russia’s largest bank, Sberbank, launched its own native cryptocurrency, the Sbercoin.

Russia has been battered by a barrage of sanctions since its invasion of Ukraine. It was eventually cut off from the majority of its foreign currency reserves as well as the global financial system. In the midst of it all, Russia’s largest bank, according to local media, announced the launch of a cryptocurrency.

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Sberbank Europe AG, headquartered in Austria 

On March 17, the Russian Federation’s Central Bank granted Sberbank a license to issue and exchange digital financial assets. Sberbank was placed on the central bank’s register, along with financial ecosystem Lighthouse, permitting both companies to issue and trade digital assets on their platforms.

However, Sbercoin was reportedly introduced on the same day by Russia’s largest bank, according to media sources. Sbercoin’s introduction, according to some industry observers, could be a mechanism to trade rubles for other currencies without avoiding Western sanctions.

Sberbank announced that it would use blockchain technology to maintain the security of digital transactions, allowing firms to develop their own digital assets, buy Sberbank’s, and conduct other transactions. Sberbank CEO German Gref stated in late 2020 that the bank was working with JP Morgan on the development of its own cryptocurrency, Sbercoin, which has yet to go live.

Sbercoin, a savior in disguise

Since the conflict, Russia has struggled to pay its dollar-denominated obligations. Some believe sbercoin will be utilised to circumvent the restrictions. However, Asheesh Birla, the general manager of RippleNet, believes that this idea is debatable. In an interview with Markets Insider, the CEO of the blockchain-based payments service provider remarked,

“It’s going to be super-problematic for them to get much traction here because they also need a liquid exchange that is going to take the Russian ruble.”

On March 17, Sbercoin started trading at $0.0003617, with a 24-hour trading volume of $948,000. According to data from CoinMarketCap, the coin, which is traded on Pancakeswap, has dropped 30.94 percent to $0.00006707 in the last 24 hours.

Russia’s Biggest Bank Rolls Out Its Native Cryptocurrency

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Russia’s biggest lender Sberbank has launched its own cryptocurrency-Sbercoin [SBER] in an effort to steer its struggling economy that has been badly beaten down by a host of sanctions since its war with Ukraine. The move reflects the nation’s struggle to meet dollar-denominated debt obligations,

In early March, trading in Sberbank came to a halt in London after its shares plummeted 95%, leading to its closure. But a few weeks later, on March 17, the Russian central bank allowed Sberbank a license to issue its own cryptocurrency, according to media reports. That led to the launch of sbercoin the same day.

A person walks by Sberbank HQ in downtown Moscow

The news of the launch was met with skepticism as one expert questioned the feasibility of the project. Asheesh Birla, general manager at blockchain-based payments service provider RippleNet said,

“It’s going to be super-problematic for them to get much traction here because they also need a liquid exchange that is going to take the Russian ruble.” Birla pointed out that while Sberbank can launch a cryptocurrency, it might not help move cash in and out of the country.

The idea for a Sberbank-issued cryptocurrency was first put forward in 2020 when the banking firm began experimenting with blockchain technology. Its CEO Herman Gref said at the time the bank could look at issuing sbercoin in 2021, a local news site reported.

Russia on a Panic Mode

The US and its allies worked together to ban Russia from using SWIFT, a global communications service that oversees international financial transactions, effectively shutting it out of international trade.

Following that the nation now demands payment in its currency the ruble for natural gas exports. Another Russian lawmaker has suggested buyers from countries friendly to Russia could pay in their own fiat currencies — or in bitcoin.

The sanctioned hit country has also begun looking out for safe havens elsewhere. In an earlier report by TronWeekly, several crypto exchanges have received a ton of requests from individuals based in Russia seeking protection for their fortunes. Some clients are reportedly resorting to investing in real estate in the UAE through crypto while others want to convert it into fiat and stash it elsewhere. 

Japan Tightens Forex Norms To Block Russia’s Crypto Escape Route

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Japan is currently working to revise its foreign exchange law to prevent Russia from circumventing Western financial sanctions through cryptocurrency assets, top government officials announced on 28 March.

Hirokazu Matsuno who is the Chief Cabinet Secretary revealed in a press conference that a revised draft of the Foreign Exchange and Foreign Trade Act would be submitted in the ongoing parliament session.

Even the country’s premier Fumio Kishida voiced his support for the law to be amended in a Monday parliament session, where he stressed the need for coordinated moves with Western allies after attending last week’s Group of Seven summit in Belgium.

A finance ministry official told Reuters that discussions are currently in progress about the proposed amendment, but refused to divulge any further details.

Japan's new Chief of Cabinet Secretary Matsuno Hirokazu announces new cabinet members, in Tokyo

Attempting to provide some clarity, Saisuke Sakai, senior economist at Mizuho Research and Technologies said, The revision “presumably enables the government to apply the law to crypto-asset exchanges like banks and oblige them to scrutinize whether their clients are Russian sanction targets.”

Japan has joined its western allies in slapping sanctions

Following the invasion of Ukraine, the Japanese government has imposed asset-freeze sanctions on more than 100 Russian officials, oligarchs, banks, and other institutions. It has also banned high-tech exports and revoked the most-favored-nation trade status for Russia, which calls its actions in Ukraine a “special military operation”.

Japan, a key US ally has been working in tandem with other nations, calling for stricter action on Russia. After G7 raised concerns in a written statement a few weeks ago, Japan immediately urged its crypto exchanges to not process transactions involving digital-assets subject to asset-freeze sanctions against Russia and Belarus.

The East Asian trading platforms which are among the most tightly regulated exchanges in the world grabbed headlines recently when they complied to implement Financial Action Task Force [FATF]’s Travel Rule on April 1. The Travel Rule essentially requires platforms to get rid of anonymity in crypto transactions in an effort to fight money laundering.

As per Japan’s regulator, the Financial Services Agency, the travel rule will improve transparency on the individuals and entities crypto exchanges deal with, as the government seeks to prevent sanctions-busting efforts.

Bitcoin energy up for grabs; Russian legislator ‘opens up’

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 A top politician in Russia’s State Duma has indicated an interest in selling the country’s energy in Bitcoin (BTC), following big swings away from the dollar and euro.

On 24 March 2022, Pavel Zavalny, the chairman of the State Duma’s Committee on Energy, held a press conference with Russia Today, the Russian government’s news channel. He attempted to explain how Russia will transition away from selling natural gas in dollars and euros, despite the fact that global energy markets are predominantly denominated in those currencies.

Upon the naming of “Friendly” states like China, Turkey, and Serbia, and Russia’s willingness to trade with them in exchange for their own currencies, Zavalny added that it was a common practice.

Zavalny went on to say that if the trade is going to be in Bitcoin then they’re willing to trade with the same cryptocurrency, which sounded more like an afterthought than a policy statement.

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vladimir putin, Russian president

Furthermore, Zavalny’s speech follows Putin’s statement yesterday that “unfriendly countries” — meaning, the United States and the European Union — will have to pay for natural gas in rubles rather than dollars or euros. The move is in response to the strengthening sanctions on Russia and its financial system, which have effectively separated the country’s banks and wealthiest residents from the rest of the world. The US Treasury, by contrast, sanctioned 328 of Zavalny’s State Duma colleagues by name today, though Zavalny has yet to appear on the specifically designated national list.

Settlements in Bitcoin will no longer be sanctions violation

Despite US pressure to move away from Russian natural gas, Europe remains largely reliant on it for energy, leaving those markets open to trade. While requiring Europe to find rubles to pay for Russian gas is likely to hinder imports, it is part of Russia’s shrinking arsenal of countermeasures.

While the United States has blocked Russian oil, gas, and coal imports, it has not imposed secondary penalties on non-US buyers of those commodities. Settlement in Bitcoin would not be a sanction breach any more than settlement in any other currency, depending solely on who was on the opposite end of the exchange.

Nonetheless, the US government has expressed concern that crypto could be utilised in future sanctions evasion. However, Bitcoin, which has a market capitalization of just over $800 billion, would face substantial liquidity concerns if it were to accept even a small portion of Russia’s energy exports.

Japan suspends crypto transactions with Russia and Belarus

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Authorities in Japan instructed its domestic cryptocurrency exchanges to cease transactions with Russian and Belarusian organizations and individuals sanctioned due to Moscow’s invasion of Ukraine. By this move, the East Asian nation joins the likes of Switzerland and Singapore in halting digital asset transactions further isolating Russia from the crypto market. 

In view of Belarus supporting Moscow’s aggression, 19 individuals, including President Alexander Lukashenko, and 15 organizations have been subjected to sanctions.

the latest development has its roots back in early March when Japan’s financial regulator and the country’s industry body announced that they were working on implementing restrictions to prevent Russia from bypassing sanctions through crypto. Japan’s Finance Minister at the time stated,

“We are closely watching the situations of settlements such as crypto assets and SPFS in order to secure the effectiveness of sanctions against Russia.”

Japan, along with the United States and other G7 nations, has frozen the assets of Russian President Vladimir Putin and certain other officials following the invasion.

According to a release, a few days ago, the G-7 leaders said, “We will ensure that the Russian state and elites, proxies, and oligarchs cannot leverage digital assets as a means of evading or offsetting the impact of international sanctions.”

Japan gov to take strict action against violators

As per sources, a total of 30 cryptocurrency exchanges based in Japan have been asked not to transfer assets targeting 44 Russian individuals. A report by Forkast further revealed that the Financial Services Agency and Ministry of Finance announced the penalties against violations.

In the joint statement, the agencies informed that crypto exchanges making unauthorized payments to sanctioned individuals could invite fines up to 1 million yen [$8,500], with individuals facing jail time of three years.

The government also asked the exchanges to monitor crypto-assets and report to financial authorities of any suspicious transactions that may involve those who are subject to the sanctions.

Last year, cryptocurrency transactions over exchanges in Japan jumped 51% in the first 11 months to 103 trillion yen [$900 billion], based on data compiled by the Japanese Virtual Currency Exchange Association. But even as the local industry kept growing, the country’s presence in global crypto markets has been waning and that has further affected due to the current situation. 

Is UAE the last resort for sanction hit Russians to liquidate crypto?

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Heavily sanctioned Russians are now eyeing the United Arab Emirates or UAE to offload several billions of dollars of digital currency. According to a report, Crypto firms have been bombarded with a flurry of requests from individuals based in Russia seeking a ‘safe haven’ for their fortunes.

One executive from these firms told how they have been flooded with queries from several Swiss brokers asking to liquidate bitcoin worth billions of dollars fearing Switzerland would freeze their assets. The exec went on to add that each of the inquiries was for transactions of at least $2 billion.

“We’ve had like five or six in the past two weeks. None of them have come off yet; they’ve sort of fallen over at the last minute, which is not rare – but we’ve never had this much interest. We have one guy; I don’t know who he is, but he came through a broker and they’re like, ‘we want to sell 125,000 bitcoin’. And I’m like, ‘what? That’s $6 billion guys’. And they’re like, ‘yeah, we’re going to send it to a company in Australia.”

As per sources, some clients are even resorting to using cryptocurrency to invest in real estate in the UAE, while others want to turn it into fiat and stash it elsewhere. This comes at a time after the EU blacklisted 160 Russian oligarchs in response to Russia’s military aggression against Ukraine.

Besides that, UAE’s close ties with Russia and its neutral stance in the ongoing crisis despite the majority siding with the western allies might have driven the increasingly isolated Russians to seek refuge for their fortunes in the West Asian nation.

UAE aiming to be a global crypto magnet

UAE has built its reputation as a growing crypto hub that has attracted the world’s ultra-rich individuals. Recently Dubai, the emirate’s financial center introduced crypto asset regulation joining the list of nations like Singapore, the US, the UK, El Salvador, etc.

Its ruler, Sheikh Mohammed Bin Rashid announced on 9th March that the emirate has enacted its first law on digital assets and has also formed an independent regulator to regulate the cryptocurrency sector.

The regulatory authority, the Dubai Virtual Assets Regulatory Authority [VARA] would be responsible for the growth of the virtual asset business environment in terms of regulation, licensing, and governance.

Trezor Wallet Halted Shipments to Russia Following Sanctions

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Satoshi Labs, the company behind the famous hardware wallet Trezor, has announced that it would no longer ship its products to Russia and Ukraine.

Following Russia’s invasion of Ukraine, more crypto-related firms are boarding the sanctions train that is making its way across the world. This time, it’s a big name in the hardware wallet industry.

Trezor.io made an announcement through its website,

“Shipments to Ukraine and Russia have been temporarily halted due to the present circumstances in these countries, which is beyond our control.” We are currently uncertain when we are allowed to begin exporting to Russia and Ukraine. However, we hope that the situation will improve fast.”

Impact of Russia’s decision on both countries

According to NBC News, this occurred “immediately” after the sanctions were released.

Satoshi Labs is situated in the Czech Republic, which was formerly occupied by the Soviet Union when it was still a part of Czechoslovakia. Furthermore, according to the newspaper, many firm workers have “connections to the war that make it personal,” according to Satoshi Labs spokesperson Kristna Mazánkov.

“Bitcoin is very apolitical,” she said. “I would like to imagine that bitcoin is a solution for different situations and that it will stay that way,” Mazánkov was quoted as saying.

“It’s dreadful to see these deeds of violence and ruthless military assault,” Trezor wrote on the same day Russia started its attack on Ukraine. “We Support Ukraine.”

Satoshi Labs made a donation of EUR 1 million (USD 1.09 million) in bitcoin (BTC) to two charities four days later, on February 28.

At the time of writing, there appears to be no equivalent statement from Trezor’s main competitor, Ledger.

According to its website, the Ledger wallet cannot be transported to seven countries/regions owing to local constraints, including Belarus and the Crimean Peninsula, which Russia invaded and annexed in 2014. This list does not include Russia.

Russia’s measures have been fast in response to its aggressive operations against Ukraine. PayPal, Mastercard, and Visa have all halted operations in the nation, and even Switzerland, which is known for its neutrality, has frozen the crypto assets of prominent Russians.