Eight days after Russia invaded Ukraine, 37-year-old Andrey left St. Petersburg, Russia. Or, in his words, he “ran in a panic” to distance himself from Russian President Vladimir Putin’s regime.
Andrey—a programmer and software developer who’s only using his first name for fear of retribution from the Russian government—fled to Tbilisi, Georgia with his wife. They took one suitcase each and filled them with vacation essentials to appear as if they were “just going on holiday” to avoid scrutiny at the airport, he says. Andrey and his wife left most of their savings with relatives to “help them survive whatever’s coming [in Russia].” And once out of the country, Andrey converted the remainder of their bank account—”[several] tens of thousands of dollars”—into cryptocurrencies. Andrey also received a promise from his main client to make all future payments in USD Coin (USDC), a digital ‘stablecoin’ pegged to the U.S. dollar. Cryptocurrencies—assets Andrey had never used before—were suddenly his primary source of money.
Western lawmakers have warned that individuals facing sanctions over Russia’s invasion of Ukraine could use crypto to bypass the punitive measures. Blockchain analytics firm Elliptic recently announced that it had uncovered “several hundred thousand crypto addresses linked to Russia-based sanctioned actors.” Nasdaq-listed crypto exchange Coinbase in early March blocked 25,000 addresses related to Russian entities or individuals believed to be involved in illicit activity.
But the world’s top cryptocurrency exchanges have refused to ban Russian users for fear of harming ordinary Russians. On March 3, Coinbase CEO Brian Armstrong tweeted that the company won’t “preemptively [block] all Russians from using Coinbase… Russians are now using crypto as a lifeline now that their currency has collapsed. Many of them likely oppose what their country is doing, and a ban would hurt them, too.” Other major crypto exchanges like Binance and FTX took similar positions.
For some Russians, crypto has become precisely that—a last resort for ordinary people who otherwise have few ways to move money and insulate their savings from the volatile ruble. Many, like Andrey, are fleeing Putin’s regime and are using crypto to skirt strict capital controls and start new lives outside the country.
Ruble vs. crypto
Before the war, Russia’s crypto market was valued at $214 billion, equal to 12% of the global total. Nearly 12% of the population—or 17 million Russians—own cryptocurrency, according to data from crypto payments gateway tripleA.
After Russia invaded Ukraine on Feb. 24 and the Russian ruble lost half of its value in the following two weeks, crypto trading volume in Russia soared. From Feb. 24 to March 3, peer-to-peer ruble-to-Bitcoin trades in Russia tripled compared to the week before the start of the war, according to blockchain analytics firm Elliptic.
Stablecoins—digital coins that are tied to a fiat currency such as the U.S. dollar and therefore less volatile—like USDC, Tether, and Binance USD were especially popular. Ruble-denominated trades in Tether, for instance, jumped to nearly $30 million on Feb. 28, three times higher than a week earlier, says digital asset analytics firm Arcane Research.
Crypto became a “helpful offramp that allowed Russians to preserve their wealth,” says Justin Newton, founder and CEO of Netki, a blockchain technology provider.
The small size of each individual transaction suggests that regular citizens looking to safeguard their savings—rather than oligarchs trying to bypass sanctions—caused Russia’s crypto trading frenzy, says Paul Mazzola, a banking and finance lecturer at Australia’s University of Wollongong. On Binance’s exchange, the average size of each trade peaked at $580 per transaction, which is “minuscule” compared to the average $2,198 per transaction in the U.S. during the same period, he says.
Crypto to start a new life
After an initial post-invasion surge, crypto trading volume in Russia declined as the ruble stabilized and payment avenues for buying digital coins in Russia—like Visa and Mastercard—dried up. As of March 18, ruble-denominated crypto trading had dipped by more than half from its recent $70 million peak on March 7, according to data from blockchain data firm Chainalysis.
But crypto remains a means of survival for Russians fleeing the country, a population that likely numbers in the tens—if not hundreds—of thousands.
Russian authorities have made it difficult for citizens to move their money out of the country. Starting March 1, the Kremlin barred citizens from depositing money into foreign bank accounts. Violating the order risks financial penalties equal to 150-200% of the transfer amount, and, at the very least, “exposes yourself and your new accounts to inquiries” from the government, says Andrey. That same day, Russian authorities enforced strict capital controls, which limit Russians leaving the country from taking more than $10,000 in foreign currency with them.
Russians living abroad have faced issues accessing their money, even though they aren’t the target of sanctions. Banks are “refusing Russians bank accounts. They are closing their doors to Russians [based] on nationality. I’m dealing with Russians who can’t get out of hotels, students who have no money because credit cards are valueless,” Bob Amsterdam, a founding partner of law firm Amsterdam & Partners, told Reuters.
Crypto offers Russian citizens a “legal alternative” to help support their move outside of the country, says Newton.
Russians leaving the country, for instance, can move their crypto into a cold wallet (also known as a hardware wallet)—a physical device that keeps digital assets offline—and take it with them to their final destination, says Mason Jang, COO of crypto data provider CryptoQuant. Moving crypto is fairly straightforward, as long as an individual holds the private key to their crypto and doesn’t rely on an intermediary like a crypto custodian or exchange, says Chris DePow, a senior advisor of financial institution regulation and compliance at Elliptic. “They can write down or memorize the mnemonic phase associated with their crypto wallet… when they have access to a computer, [they can] regenerate that wallet with all of their holdings intact.”
In Telegram chat rooms designated for Russian emigres in cities like Istanbul and Tbilisi, users exchange tips for moving money out of Russia via crypto. One Georgia-based consultant, who declined to be named, says Russians can easily move money to Georgia via stablecoins. Russians can exchange rubles for USDT at a crypto exchanger in Russia, then transfer their coins to a USDT crypto wallet. Once in Georgia, they can swap their USDT for fiat currency at any local crypto exchange, she says.
Prior to leaving St. Petersburg, Andrey had never bought or used cryptocurrencies. “I considered it an unproductive investment [and use] of my time,” he says.
But with only $20,000 in cash, Andrey converted his savings into crypto once he was out of the country using online Russian exchanges found via BestChange.ru—a platform that helps users find and compare crypto exchanges. The exchanges he used still accepted transfers in rubles from Russian banks as a payment method. Andrey could have asked contacts still in Russia to bring he and his wife more cash in Georgia, but such “methods would’ve been more expensive and less pleasant to organize,” he says. Buying crypto is still legal in Russia, so it was the “most straightforward way” for Andrey to get his money out.
Once Andrey and his wife were in Georgia, converting their crypto into cash was “laughably simple,” he says. Georgia’s two largest cities of Tbilisi and Batumi have multiple crypto exchangers that convert digital coins into cash. The swap can be done in-person or online and doesn’t require a local bank account. Crypto exchange Ravestag only requires a photo and a passport scan as identification, while competitor Conexus “doesn’t even ask for a passport,” Andrey says. Conexus even delivers cash to customers’ front doors for an extra fee, he says. Converting crypto to cash isn’t free, however; exchanges typically charge 2.5-3% fees.
Other Russians, like graphic designer Anton—who left Russia for Turkey and is going by only his first name to protect his family who remains in Russia—had bought a “mix of Bitcoin and stablecoins” on Binance and other platforms prior to Feb. 24. Istanbul, where he’s based now, has crypto kiosks scattered throughout the city, and Anton has used them to exchange his crypto for cash. “All I need is an address in Turkey. My new life hasn’t been too difficult because of crypto—and many other Russians have used this route to transfer assets out of the country to also begin a new life,” he says.
A primary objective of the Western sanctions is to foment economic hardship for Russia and ordinary Russians that will “erode support for the war in Ukraine in particular and for Putin more generally,” says Michael Reynolds, director of the Russian, East European and Eurasian Studies at Princeton University. The ease with which some Russians are moving money via crypto doesn’t necessarily dull the pain of sanctions since crypto remains niche and accessible to only a sliver of the population, Reynolds says.
Andrey and his wife don’t know what their future holds. But leaving Russia was a “huge relief that can’t be overstated. We mourn the loss… of our old home sometimes. [But] we don’t miss today’s Russia in any way,” he says.
Andrey still isn’t a staunch believer in crypto, but the digital assets have “made life easier for us.” he says. “Without crypto, it’d be very hard to get [any] meaningful money out of Russia.”
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