Crypto assets are also vulnerable - Sanctions against oligarchs

In order to circumvent Western sanctions, oligarchs are also likely to flee into cryptocurrencies such as Bitcoin. But here, too, the assets would not be safe with appropriate sanctions.

Assets are frozen, entry bans imposed: While the West repeatedly imposes new sanctions against Russian oligarchs close to President Vladimir Putin, they are trying to bring their assets to safety as quickly as possible. According to media reports, there are suddenly expensive properties in London or luxury yachts for sale. The oligarch Roman Abramovich even wanted to sell Chelsea FC as quickly as possible. But the British government preceded him and froze his assets - with immediate consequences for him and the football club.

Bitcoin and Co. as an escape from sanctions

But even if quick sales succeed, the question remains where the super-rich can safely safely protect their wealth from Western sanctions. Experts and politicians suspect the flight into crypto currencies such as Bitcoin, Ether and Co.

"Bitcoin could be a possible safe haven for Russian oligarchs to avoid sanctions, as there is no censor in the Bitcoin network and cryptocurrency transactions," said Ipek Ozkardeskaya, an analyst at Swissquote Bank. Cryptocurrencies are decentralized and cannot be controlled by banking systems.

Sanctions also possible in the crypto market

And indeed, the Bitcoin price rose by ten percent the day after the sanctions against the Russian central bank came into force. Especially in Russia and Ukraine, Bitcoin trading has skyrocketed. Back in October, the U.S. Treasury Department warned that cryptocurrencies would pose an ever-increasing threat to Western sanctions.

Nevertheless, cryptocurrencies are not necessarily a salvation from the consequences of sanctions. From a technical point of view, sanctions are also possible here. "Established platforms require their actors to have an identification document for identification and a bank account in the name of the actor before establishing the business relationship," says Uwe Heim, an expert on crypto and Russian organized crime. That's why Mykhailo Fedorov, Ukraine's deputy prime minister, has repeatedly called on "all major crypto exchanges to block the addresses of Russian users" since the invasion.

Crypto exchanges refuse to block Russian users

The crypto exchanges are making it clear that they would comply with the sanctions. However, they have so far refused to block Russian users. After all, the basic idea behind crypto currencies is precisely to have a currency that largely escapes state influences and does not exclude anyone. "Unilaterally denying people access to their crypto assets would completely contradict the sense of crypto even existing," a representative of the largest cryptocurrency exchange Binance told CNBC.

US crypto exchanges Coinbase and Kraken also announced that they would not freeze the accounts of their Russian users without a legal obligation. Nor are they obliged to do so by sanctions. "Russians should be aware, however, that such a measure could be imminent," said Kraken CEO Jesse Powell. This means that sanctions could also have an impact on the crypto market. Crypto exchanges would then have to freeze assets - similar to conventional banks.

Anonymity does not provide secure protection

Even the partially existing anonymity offers no real protection, according to experts. Because even if you can own cryptocurrencies anonymously, "the moment a cryptocurrency is used or exchanged, this happens on an exchange, and the anonymity is dissolved. For example, oligarchs have Bitcoin holdings, but they could not do much with them in sanctioning countries, because even then the sanctions apply," says Philipp Sandner, head of the Blockchain Center at the Frankfurt School of Finance.

The fact that cryptocurrencies are still unregulated is a common misconception. Even small exchanges could identify users. Therefore, crypto currencies are now unsuitable for flight and black money. "The larger the amounts become, the less anonymous transactions are possible. This is a desired result of the regulation of recent years," says Sandner.

Bureaucracy as a possible problem

With appropriate sanctions, Russian oligarchs could not easily bring their assets to safety by fleeing to crypto currencies. However, this is exactly where crypto expert Timo Emden sees a problem: "By the time the legislator waves through the new regulations, the train may have already departed. It is quite possible that wealthy Russians have already moved and concealed their funds on a large scale.

"In order for the oligarchs to be sanctioned, countries would have to prove that their wealth was linked to Putin. Thus, months could pass before most oligarchs are actually sanctioned. Preventing the crypto flight could therefore ultimately fail because of the bureaucracy - and not because of the technical hurdles.