Will the Russia-Ukraine conflict separate the crypto myth from reality?

 Will the Russia-Ukraine conflict separate the crypto myth from reality?

This may be a defining moment for longtime crypto critics to achieve what they’ve always wanted over the years to stop the free run of the borderless currency. Finally, an opportunity has arrived to make the big push for a stringent regulation, which they see as an end to stop the cryptocurrencies run around traditional securities market regulation.

The debate for stricter regulation of cryptocurrencies has gathered storm in the United States this week as three other Democratic senators have joined Senator Elizabeth Warren, in sending a letter to Treasury Secretary Janet Yellen seeking reassurance to prevent Putin from using digital coins to evade sanctions.

“Cryptocurrency can allow financial criminals, drug dealers, and tax cheats to move money around in the shadows — potentially opening the door for Putin and his cronies to evade the economic sanctions that serve as the centerpiece of the international response to Russia’s invasion of Ukraine,” Warren said in a statement to NBC News.

“Financial regulators need to address this urgent threat to ensure that crypto doesn’t undermine our national security,” she said. But the criticism of cryptocurrency has also come from Republicans, adding possible bipartisan momentum to the push for regulation.

“Cryptocurrency is rearing its ugly head here,” Senator Lindsey Graham, said this week after a classified briefing on the Russia-Ukraine conflict. He said he was worried about Russians using virtual currency to evade sanctions.

Jerome Powell, the chairman of the Federal Reserve and a Republican, has repeatedly called for new U.S. laws to govern the crypto industry, a position that he reiterated in congressional testimony.

However, pro lobby advocates in defending the cryptocurrency, have emphasized the plight of the Russian citizens who do not support or hardly had any opinion with Putin’s decision to send troops into Ukraine.

“If you’re a middle-class Russian right now and your entire financial system has been seized and blocked, is it legitimate for you to be able to put $100 or $1,000 of your savings into a crypto hard wallet that you could take with you if you’re leaving the country with the clothes on your back?” Selkis countered.

It’s not clear how many Russians are in that situation, but it’s certainly a minority. Russia ranked 18th out of 154 countries last year in a Chainalysis report on the grassroots adoption of cryptocurrency, and a more recent report showed Russians have not been flocking for cryptocurrency in recent weeks.

Worldwide, retail investors in cryptocurrency are increasingly being overshadowed by hedge funds and other institutional firms. The overall effect of the Russia-Ukraine conflict may be to separate crypto myth from reality, something that’s been happening already in the past couple of years.

United States authorities have partially unraveled their adhered perception that digital coins are “unconfiscatable,” seizing $3.6 billion in bitcoin in one confiscation last month. Agents in that case used a search warrant to obtain access to an online account where one of the alleged thieves kept the private keys required to access his digital wallet.

People who own cryptocurrency can add layers of security to make government seizures more difficult, including storing their coins offline in a device known as a “cold wallet” or “hard wallet.” People can then take those devices around the world. But for Russians who might want to obtain such a device now, even that has become more difficult.

“We are not delivering into Russia,” said Kristýna Mazánkov, a spokesperson for Satoshi Labs, which says it has sold more than 1 million of its Trezor crypto wallet. She said the company halted shipments immediately after the imposition of sanctions. Satoshi Labs is based in the Czech Republic, where Mazánkov said sympathy for Ukraine runs very high. Let us recall that in 1968, the then-Soviet Union invaded the country known as Czechoslovakia.

“Bitcoin is very apolitical,” she said. “I would like to imagine that bitcoin is a solution for different situations, and that it will stay that way.” But she said some company employees have connections to the conflict that make it personal. “We are touched by the situation in Ukraine.”