Divisions between crypto-evangelists and their opponents have never been this stark. Ever since Russia invaded Ukraine on February 24, Western governments have been concerned that the Kremlin could use cryptocurrencies to evade financial sanctions. Although there is no evidence thus far of sovereign-level ruble-to-crypto trading, Washington and Brussels want global cryptocurrency exchanges to impose blanket bans on Russian users.

The response from this nascent and still largely unregulated industry has been avowedly libertarian: they refuse to fall in line with Western nations’ efforts to isolate Russia, even if that means provoking a backlash from the millennial and younger generations who are primary adopters of cryptos. The industry does not wish to go beyond strict sanctions compliance. These divisions have brought to the fore the risks - as well as the potential - of private cryptocurrencies that trade freely across borders, even in times of war.

In this white paper, we discuss: 

• Do cryptocurrencies have the potential to defang the international sanctions framework now and in the future?
• Can policymakers devise an appropriate regulatory regime for cryptocurrencies so that financial inclusion can expand without eroding systemic financial stability?
• What will be the impact of central bank digital currencies on private cryptos?