ECB warns of sanctions again, but ruble-denominated cryptocurrency trading volumes still down

European Central Bank President Christine Lagarde has again warned that Russian individuals and businesses are using cryptocurrencies to circumvent sanctions.

However, as of March 18, daily ruble-denominated cryptocurrency trading volumes were just $7.4 million, according to Chainalysis data, down more than 50% from recent figures and peaking at $70 million on March 7. .

That figure represents a tiny fraction of the total global crypto market volume, which typically fluctuates between $20 billion and $40 billion a day for Bitcoin.

Speaking at the BIS Innovation Summit on Tuesday, the cryptocurrency skeptic Lagarde said that European financial authorities have seen "trading volumes in the ruble against stablecoins and cryptocurrencies are now at the highest level probably not seen since 2021. "

Rather than pointing fingers at the Russian government, Lagarde noted that it is primarily Russian individuals and businesses that have turned to cryptocurrencies. However, she said cryptocurrencies are “certainly being used as a way to try to circumvent sanctions.”

“So, is (cryptocurrency) a threat? Yes. Was it a threat in the past? Yes, because when you look at a lot of suspicious transactions that are happening, a lot of criminal activity payments that are happening, you often find some crypto assets."

Lagarde’s remarks appear to be at odds with data provided by Chainalysis and Kaiko, as well as expert opinion. Jake Chervinsky of the Blockchain Association said that Russia is unlikely to use crypto assets as a means of circumventing Western sanctions.

Trading volume in rubles for all cryptocurrency exchanges Source: Bloomberg

Data provided by crypto analytics firm Kaiko shows that ruble-USDT trading volumes fell 86% from a peak of $38 million on March 7 to less than $5 million on March 22. There were spikes in trading volumes both before and after the war, but volumes are now back below levels seen for most of early February. That was before sanctions were imposed.

Instead, cryptocurrencies have played a role in helping Ukrainian refugees flee Ukraine. CNBC reported the story of a Ukrainian refugee who goes by the pseudonym "Fadey." “Fadey” fled the war-torn country with $2,000 in bitcoin in a cold wallet, making it easier for him to withdraw his monetary assets once he arrived in the safe zone of Poland.

Alex Gladstein, chief strategy officer at the Human Rights Foundation, said trying to withdraw money from Ukrainian banks in the weeks leading up to the invasion was extremely difficult, and highlighted the difficulties refugees are currently facing trying to obtain funds from countries such as Poland.

"How are you going to access your Ukrainian bank account in Poland? Good luck."

According to Merkel Science, donations to Ukraine via crypto-assets have increased dramatically over the past 3 months, with donations to Ukraine now totaling $100.9 million per day.

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