The Foundation for Defense of Democracies (FDD), an American organization, has published a report about cryptocurrencies being used by US adversaries to evade US sanctions. The report, published on 11th July, outlines the future possible scenarios in which countries might be able to evade these sanctions using blockchain technology.
The threat will grow as use cases of blockchain expand and it becomes a mainstream technology. The report gives example of US sanctioned countries like Venezuela, China, Iran and Russia that are using their own digitalized tokens for transactions. It highlights the fact that these tokens can potentially circumvent US trade sanctions in the future and affect the US influence.
The report also highlights a scenario in which the above-mentioned countries are able to convince other nations to follow suit and issue a state based digital token, backed by commodity exports such as oil, copper and other rare earth materials. This would allow these countries to trade with other nations undetected.
The report also raises a red flag in a scenario if the digital token gets internalized by the local population. If countries develop their own digital wallet system and the local population uses it for transaction with local companies, this would be a scenario of great concern to the United States.
The countries with heavy US sanctions have already established their state backed cryptocurrencies and blockchain technology has been fully integrated into their central banks. The system can also be used to make untraceable cross-border payments by these central banks.
The report also identifies the following threat:
An independent cryptocurrency such as Bitcoin [BTC] gains wide adoption in commerce and becomes more relevant to the global financial system. Then, a U.S. adversary begins to build significant reserves in the cryptocurrency. The state thus uses its holdings to gain more influence in the global financial system.
Russia, a country severely affected by the US sanctions, has seen a shift in its attitude towards cryptocurrencies. At the start of the year, the Russian Duma had passed a Digital Financial Assets (DFA) bill that the Duma has been postponing since March.
Meanwhile, China has started to develop its own cryptocurrency, run by the central bank. The Chinese officials have been reported to be threatened by Facebook’s Libra project and the currency is being launched to counter it.
Even though the country has banned trading of cryptocurrency, the announcement by the central bank couldn’t have come at a more ironic time. While it is also illegal to trade cryptocurrency in Iran, a previous BlockPublisher report highlighted that the country has a booming bitcoin mining industry.
Venezuela is the newest addition to the list of US sanctioned countries. The country has seen some hard times recently as the oil prices fell globally. The country has launched Petro, an oil backed digital currency, that the government thinks will help the country during these tough times.