The US administration is considering sanctioning certain Chinese institutions in response to intensifying geopolitical tensions.
The goal of these actions is to cut these institutions off from the international monetary system, as stated in a Wall Street Journal article. Their role in enabling commerce that strengthens Russia’s military capacities against Ukraine is the main worry.
China has denied supplying Russia with weapons since the invasion of Ukraine started, but the United States maintains that Russia’s military has been significantly bolstered by the shipment of dual-use commodities like electronics and equipment. The goal of these proposed sanctions is to provide an “escalatory alternative” in the event that diplomatic efforts are unsuccessful.
Cryptocurrencies have long been a solution for nations cut off from the international monetary system. Tether (USDT) has been used by PDVSA, the state-run oil firm of Venezuela, as a means to circumvent the recently reinstated US sanctions. The goal is to shield its oil profits from the restrictions imposed by foreign banks.
Similarly, Russia has evaded Western sanctions by using cryptocurrency. Reportedly, Russian companies are acquiring critical components for military gear using Tether’s USDT. With this method, deals may go through that traditional banking systems have a harder time keeping track of.
A growing number of transactions using cryptocurrencies in these settings show that governments are using them to evade sanctions.
In light of these events, there is increasing conjecture over China’s possible reaction to facing such isolation. Due to long-standing worries about financial instability and illicit fund outflows, China has always been rather stringent in its regulation of cryptocurrencies.
“Investigate the shift in Chinese investment priorities away from real estate and equities and towards gold. Even though Bitcoin has been experiencing a similar occurrence in China, its limited access has prevented it from reaching its full potential,” said Venture Capitalist Andrew Kang, who pledged to open the dam.
A possible exclusion of Chinese banks from the global financial system may cause a reassessment of this position. In particular, it has the potential to promote crypto-friendly regulation.
In situations where nations do not have access to conventional banking services, this change would be in line with the worldwide trend of incorporating cryptocurrency into economic systems.
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