The U.S. has expanded sanctions on Russia for its attack on Ukraine, though restrictions on Russia’s access to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) have yet to be activated.

Banning Russia from SWIFT — an international financial messaging system — could “isolate Russia almost completely from large parts of the global economy,” Amnon Samid, CEO of Israel-based cybersecurity firm BitMint, told Forkast.

While cryptocurrency may be an efficient medium for Russia to bypass current sanctions or the possible SWIFT expulsion, it is unlikely for Russia to turn to digital assets, industry experts told Forkast.

Following a G7 world leaders meeting, U.K. Prime Minister Boris Johnson said on Thursday that nothing was off the table, including shuttering Russia’s access to SWIFT. 

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Formed in 1973, SWIFT is a global financial intermediary and now operates in over 200 countries and territories, connecting more than 11,000 financial institutions for secure cross-border transactions.

Caroline Malcolm, head of international policy of blockchain analytics firm Chainalysis, told Forkast that there are bad actors in the crypto space who would make efforts to help Russia evade sanctions, as in traditional finance (TradFi).

“The cryptocurrency ecosystem kind of put in place measures to identify transactions from sanctioned entities abroad,” Malcolm said, adding that it is unlikely that the affected individuals or entities would move around large quantities of crypto now as they might have already done months ago.

Senior researcher at Hong Kong-based crypto firm Babel Finance Robbie Liu told Forkast that it is unrealistic for Russia to avoid sanctions via crypto as the market is mainly denominated in USD-pegged stablecoins.

“We’ve not been able to service Russian nationalities,” said Wayne Huang, co-founder and CEO of Taiwan-based crypto-fiat exchange XREX, adding that the company follows FATF guidelines and sanction lists of the U.S. and United Nations. “However, not all crypto platforms follow these guidelines.”

Government measures

Chainalysis tracks cross-border blockchain criminal activities, but has not detected unusual activity in Russia or Ukraine.

“Any information on relevant wallet addresses will be added to our products and available to our partners immediately,” Malcolm said, as the firm continues to monitor possible actions related to Russian cyber criminal groups.

To prevent sanction workarounds, Malcolm said governments seeking to enforce sanctions can invest in blockchain analytics to “get ahead of Russian efforts to obscure any sanctions-evading transactions.”

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​​The transparent nature of blockchain combined with monitoring tools can be a “powerful strategy to ensure sanctions remain a credible deterrent,” Malcolm said. “In fact, this is much more streamlined than any tools capable of disrupting Russia’s use of a network of traditional bank wires or physical cash to evade sanctions.”

Domestic alternative

Russia has developed its homegrown “System for Transfer of Financial Messages” (SPFS) used locally among banks, Samid said. “Russia could quite easily expand its SPFS system for international payments, with countries that are being considered as ‘US adversaries’ like Iran and China.”

Meanwhile, Russia’s recent move to draft a bill to regulate crypto circulation in the country “looks to me as a preamble for issuing stablecoins backed by the ruble,” Samid said. Though it may take a long time to deploy, ruble-backed stablecoins may offset the potential disconnection of SWIFT for some degree, he said.

“In terms of ruble-bitcoin trading pairs, we’re definitely seeing a spike in those,” Malcolm said. Investors in Ukraine are also trading as the violent invasion continues. Trading volume in Ukrainian crypto exchange Kuna has more than tripled by Friday.