Russia’s largest bank has been removed from global financial markets and has now launched a cryptocurrency.

A person walks past the Sberbank headquarters in central Moscow.

A person walks past the Sberbank headquarters in central Moscow.Pavel Golovkin/AP

  • Russia’s largest bank got permission to issue a digital currency just weeks after the Ukraine invasion.

  • Sberbank launched sbercoin when Western sanctions hampered Russia’s access to the global financial system.

  • The United States and its allies are concerned about Russian use of cryptocurrencies to circumvent sanctions.

Since Russia began its war against Ukraine, a series of restrictions have been placed on the country, isolating it from most of its foreign exchange reserves and from the world financial system.

In the midst of all this, Russia’s largest bank launched a cryptocurrency.

In early March, just days after the invasion began, trading in Sberbank shares ground to a halt in London after they plunged 95%. the lender was ordered to shut down its European business while Western sanctions threw Russia’s economy into chaos.

But just two weeks later, on March 17, the Russian central bank granted Sberbank a license to issue its own cryptocurrency, according to media reports. That led to the launch of sbercoin on the same day.

Russia is seen as struggling to meet its dollar-denominated debt obligations, and has said it will demand payment for its energy in rubles.

In that context, there has been speculation that sbercoin could become a quietly tolerated way to exchange rubles for other currencies and get around restrictions.

But the feasibility of this is debatable, according to Asheesh Birla, general manager of blockchain-based payment service provider RippleNet.

“It’s going to be super problematic for them to get a lot of traction here, because they also need a liquid exchange that takes the Russian ruble,” he told Insider.

The sanctions caused a fall in the ruble and prompted Moscow to bring capital controls. The Russians were quick to protect their wealth in foreign currency, and a black market in dollars and euros arose.

Birla noted that while Sberbank may launch a cryptocurrency, it may not help move cash in and out of the country.

Stablecoins like Tether and USDC are popular (they rank among the top five cryptocurrencies by market value, according to data from CoinMarketCap) because exchanges use them to trade in and out of other cryptocurrencies.

“I’m not sure it’s going to be very useful in terms of getting liquidity in and out of Russia,” Birla said of sbercoin.

“It’s like taking your own bank account and putting it in a ledger. It’s not that useful, unless you can start trading it for other things. And so far, the data I’ve seen is that it’s not very liquid,” he said. aggregate.

Sbercoin it started trading at $0.0003617 on March 17, and its trading volume in the 24 hours after launch was just under $948,000, according to data from CoinMarketCap. The coin, which is primarily traded on Pancakeswap, is down about 90% since then to $0.00002211, and its 24-hour trading volume stood at $1,248 as of 12:30 pm ET on Friday.

The potential of a Sberbank-issued cryptocurrency was first raised in 2020, when the lender began experimenting with blockchain technology. Its chief executive, Herman Gref, said at the time that the bank could consider issuing sbercoin in 2021, a local news site reported.

In September, the deputy chairman of Sberbank said that he hoped to register his blockchain plans with the Central Bank of Russia. But he hasn’t spoken since about his crypto plans and didn’t respond to Insider’s request for comment.

The United States and its allies are concerned about the use of cryptocurrencies to circumvent financial sanctions on Russia, although there has been little sign of this.

Indeed, ruble-to-crypto trading volume has fallen since the beginning of the invasion, when it soared more than 900% to more than $70 million in five days, its highest level since May 2021, according to research from Chainalysis.

Chainalysis found in its 2021 research that Russia ranks high globally in cryptocurrency adoption. Therefore, high ruble-denominated crypto trading volumes may not necessarily reflect attempts to evade sanctions.

Read the original article at Business Insider

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