Crypto markets have inadequate liquidity to sustain sanctioned Russia, TRM Labs’ executive says

Crypto markets have inadequate liquidity to sustain sanctioned Russia, TRM Labs’ executive says

By Sam Grant - min read
  • TRM Lab's Ari Redbord expects Russia to turn to crypto to skirt the economic pressure of sanctions from the West
  • However, the executive believes that crypto markets are not liquid enough to serve Russia's financial demands

In an interview with CNBC today, Ari Redbord, the Head of Legal and Government Affairs at blockchain transparency firm TRM Labs, has suggested that even though Russia may look towards cryptocurrencies to help navigate the wild effects of sanctions from the west, they just won't cut it.

As the US and its allies attempt to close Russia out of the dollar-denominated financial system, the crypto specialist theorised that he expects Russia to ultimately turn to cryptocurrencies.

"Look, crypto provides an alternative to traditional financial systems. If the US sanctions program is predicated essentially on entirely on the status of the US dollar as the global reserve currency, you're going to see Russia attempt to circumvent the US financial system by turning to crypto," he held.

However, he recognised that crypto isn't nearly as used to a scale high enough to deal with the escalating wave of sanctions hitting Moscow. Redbord explained that for a country the size of Russia, high levels of crypto liquidity (currently unavailable in the market) are required to remedy the effects of sanctions and fund its ongoing war.

On-ramp and off-ramps

The TRM Labs executive also elucidated that in the bigger picture, crypto utility is currently limited, and that means should Russia turn to crypto, on-ramps and off-ramps will be required to leverage fiat-crypto and crypto-fiat conversions.

He noted that crypto exchanges able to provide a huge chunk of the market liquidity, say Binance, have some compliance and monitoring measures in place, making them not very desirable options for Russia.

"…large exchanges like the ones we hear about, Coinbase, FTX, and Binance and those places that have robust compliance controls in place. They have compliance officers, they file suspicious activity reports, they use a transaction monitoring solution like TRM Labs to monitor transactions, to screen wallets…" he posited.

Russia suffers increased sanctions

In response to Russia's ongoing military action in Ukraine, the US and its Western allies have hit Russia with a series of sanctions in the last few days.

The US, UK, and EU have specified "restrictive measures" on Russia's central bank, effectively blocking transactions with the bank and freezing its assets. This coordinated action against the central bank aimed to prevent it from "deploying its international reserves in ways that undermine the impact of our sanctions". 

The western world has also resolved to remove select Russian banks from the international SWIFT monetary system that interconnects banking institutions worldwide. The intention is to prevent these lenders from operating around the world.