Crypto promoters claim the current crypto hike is a sign the industry is tracing a new role. That is an allegedly brand-new haven for investors given the markets’ vulnerability spurred by Trump's trade war.

In reality, crypto is not a safe investment haven, never was and hardly will be. 

It’s doubtful anyone can choose the complete speculative assets along with price manipulations incorporated within its transactional architecture by default (token transmission within the block production process) as a safe haven.

Albeit there should be some reason for this wild crypto rally anyway... And here is a glimpse of the problem. Trump had caused chaos not only with the tariffs’ uncertainty but also the outrageous play game on the side of the aggressor - Russia - in its illegal war against Ukraine. The greater evidence of Trump’s favouritism to Russia appeared very recently, just the same time the crypto began to rise.

This time is no exception. We’ve already mentioned the crypto accompanying the interests of the Russian authorities throughout these years before (e.g. see Note 102 «Crypto Backs the Interest of Russia» ;  Note 107 «Russia-Backed Crypto: The ‘Go’ Code to Attack» ; Note 117 «The Crypto:Favorite of Russian Authorities» ; Note 120 «The Crypto: Authocraties vs Democracies» ; and Note 124 «Authoritarian Blockchain: The Very Last best of Russia» ). Not to mention the crypto’s profound criminal role in aiding Russia with sanction evasion and war financing schemes. We’ve seen how crypto dramatically undermined the efficiency of international sanctions imposed on Russia for the last three years.

Should we recall the top public crypto admirers among the world leaders, they would be Donald J. Trump (USA) , Vladimir Putin (Russia), Nayib Bukele (El Salvador). As the matter of fact, the crypto has already proven its part as a favorite financial tool of populists and agressors around the world.

After all, one moment is clear. Crypto markets can’t be and shouldn’t be treated and evaluated from either legal finance’s point of view or transparent investment stance. Otherwise, it became the powerful weapon in the hands of agressor…

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 131) by Dr. Olga D. Khon

Despite an immense promo campaign and an army of fans, it became obvious that the crypto industry is a favourite tool for criminals and illicit actors.

Facilitating illicit finance by crypto is a peculiar area in which authoritarian regimes led by Russia are the most involved. The current release (under the prisoner swap) of convicted Russian crypto fraudster and money launderer Alexander Vinnik from the US prison gives us the next example.

As far as it’s clear that crypto has quite a negative connotation, there is no surprise. How many times ordinary investors were misled and deceived by crypto and have lost their life savings? Do you recall each of the Bitcoin Halvings events? With no fundamentals behind, boosted anticipation of Halvings only led retail investors to losses. Yet, the 2024 US election and Donald Trump led to the late hysteria on crypto markets.

Cryptomen turned to applying other hype words to express the same self-interest under cover, e.g. digital currencies, digital finance, machine learning (ML) or artificial intelligence (AI).

But every professional economist knows that not a single crypto token can ever be a currency. And that the term “cryptocurrency” is incorrect by default. These tokens are not legal tender (even some authoritarian regimes like El Salvador hold crypto as reserve assets) and solely represent speculative crypto assets.

So, there is only one type of digital currency that can be. And that’s central bank digital currencies (CBDCs). Once again, the rest of the crypto tokens disregard their types is a bunch of speculative crypto assets with no intrinsic value.

After all, crypto men are fond of juggling with the hype terms to sound more solid. They even add the pomp of gamification in education to seem to be fashionable while lacking in provision of the fundamental knowledge. But it often has quite superficial and mostly artificial significance, if any.

By pushing a plain and one-sided point of view (avoiding any critique), crypto men try to demolish the quality of education to satisfy their greed. It’s the same trick all the dictators and authoritarians do to deteriorate the analytical abilities and critical thinking of the public to easily manipulate them under demand.

Cryptomen forgot that students are smart ones, they are our future generation. And students have a myriad of opportunities to learn from online materials including those provided by the top universities and scholars and leading companies around the globe.

So, we as educators should deliver not common information already available everywhere with no need for a teacher but a holistic knowledge on the subject with deeper qualifications and skills that can’t be easily observed online. And prevent malicious concept shifts when crypto is undercover that damage high-quality education… 

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 128) by Dr. Olga D. Khon

What is an unexpected side effect of technological advancement in artificial intelligence (AI) and crypto finance for modern society?

Unfortunately, it also serves for the good of authoritarian regimes threatening democratic principles around the world.

Nowadays, we are all familiar with the painful disruption caused by crypto assets to financial compliance. This field still provides a workable tool to evade financial regulation and sanctions — to channel cross-border illicit finance on an unlimited scale.

For instance, in the wake of international sanctions, there are so-called stablecoins nominated in Russian rubles. Their circulation has not been banned elsewhere, nor has their further conversion into major fiat currencies like USD, GBP, or EUR.

In short, smart contracts are the proactive enablers here. This technology allows to obscure asset origin, launder substantial proceeds from illegal activities, and finance criminal actions on the global stage. The growing rate of official acceptance and greedy institutional and public involvement within the crypto world make the case extremely dangerous.

We’ve already highlighted the danger of smart contracts on several occasions (e.g. see Note 111.«Smart Contracts: The Colossus on Clay Feet?»; Note 108.«Smart Contracts and Asset Tokenisation: The Dream Time for Illicit Finance»; and Note 96.«Mirror of Shadows in Smart Contracts»).

In authoritarian regimes, crypto assets could help oppressive authorities to suppress surveillance over their citizens. At a place where cash can’t be controlled, the crypto paths over state-managed channels are easily traced inside the country.

Sadly, modern technology applications and crypto payments assist the most cruel political regimes and criminals to thrive.

A more common example outside crypto is a traditional celebration of the New 2025 Year in Russia. Apart from just being outrageous at the background of the unfolding invasion of Ukraine, this period shed light on technological exploitation the authorians imply within the country and even beyond.

Russian state TV shamelessly substituted faces of unwanted artists opposing the Russian aggression against Ukraine with AI-overlayed images or masks of loyal-to-regime ones within original performances while screening popular movies of the Soviet-era times. It’s implemented by the particular approach within ML called convolutional neural networks.

The technical trick, known as deepfake, is not new but the scale and attitude toward it changes.

The simple application of neural networks, or machine learning and AI more generally, facilitates not only effectively brainwashing the population but also depreciates the value of copyright and original creativity. The spread of AI is poised to make plagiarism the malicious new normal in many parts of our lives.

There is a psychological effect on a person with subsequent deformation of the consciousness.

As economists, we admit that in the age of big data, the knowledge of machine learning techniques in finance becomes essential. We could teach our students and apply it throughout research. But we should also raise the issue of the negative impact on human intelligence and blocking the development and abilities of humankind.

Nowadays, such exploitations of that scale seem absurd in a democratic world. However, the painful examples of intense propaganda and populistic narratives, if not stopped in time, could attack the very fundamental grounds of civilized nations.

Yet autocrats exploit AI and crypto finance against democracy, it wouldn’t last with impunity forever…

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 126) by Dr. Olga D. Khon

The world has gone far away from a conventional framework of war as confrontation on the battlefield. Nowadays, authoritarian regimes are actively engaged in hybrid wars. They employ massive disinformation, cyber-attacks, and crypto finance to facilitate cross-border crimes. Given the vitality of crypto channels to evade international sanctions and violate financial regulation, autocrats intensively produce corruption and orchestrate election interference within the democratic world.

Blockchain and crypto boost harmful exploitations restricted in mainstream finance. They spread illicit finance to an unprecedented scale and put the global financial system’s stability at risk in the future. These days, the back door of crypto-hostile interference in the national interests of independent states is impossible to ignore.

So, how has crypto-led corruption become possible internationally? The short answer is smart contracts and decentralized finance (DeFi).

In brief, a smart contract is the basis for all types of derivative tokens — from stablecoins, non-fungible tokens (NFTs), memcoins, liquid staking tokens, decentralized autonomous organisations (DAOs) governance and other utility tokens within DeFi, up to the entire field of asset tokenization. Unfortunately, all these applications serve as immense cover to those peculiar novelties of smart contracts that provide a breach of financial compliance and assist cross-border illicit finance.

The crypto world often insists smart contract transactions are recorded on a blockchain and, thus, allegedly can be fully traced. In reality, the trick is the ledger record quality. In general, these transactions are recorded but not the way the majority thinks of a peer-to-peer (p2p) blockchain. Technically, transactions sent through smart contracts have a ledger record that only updates this smart contract’s state. So, there is no transparent clarity as it’s provided within the p2p-blockchain transaction.

Since smart contracts can store data both on-chain and off-chain, the informationally valuable initial transactions are stored mostly off-chain (beyond the blockchain ledger). Primarily generic data is held on-chain (within the blockchain ledger).

Simply put, smart contracts do not provide clear blockchain records for each transaction processed. Smart contracts just update interacted accounts’ balances. These transactions are usually batched and recorded as aggregated ones with little information on the parties involved. Even if one would trace the transaction as the “call” from the initiator’s address to the smart contract (e.g. using blockchain explorers), token transfers could be done between either unrelated peer parties or other smart contracts’ addresses.

The case worsens with so-called multisig accounts run on smart contracts where multiple holders own one single account and execute transactions through it. In this instance, even the informational value of initial transactions is drastically diminishing.

Herein the full data disclosure exists not for regulators and the general public but for the core blockchain developers and originators along with developers of every smart contract’s project team. Therefore, core developers and originators (e.g. Ethereum Foundation) are well aware of illegal activity executed throughout their blockchains for years. Albeit they pretend not to, keep silent and escape legal responsibility.

Besides, proper tracing demands the full possession of a node within a particular blockchain. In other words, the tracer should be either a block producer on the target blockchain (and turned out to be an interested party of it) or appeal to some third party for a data extraction service. The tracing task transforms an observer into a dependent on blockchain developers of different suits. Objective tracing becomes viable only in cooperation with blockchain developers interested in shielding crypto offences from regulators. Thus, this mission is impossible.

More than ever democratic countries should join their efforts to prevent crypto-provided corruption and fraud. And to leave no space for crypto and blockchain to thrive as the weapon of hybrid wars. er…

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 125) by Dr. Olga D. Khon

When the crypto accomplices Russian authorities to evade sanctions and finance its aggressive war machine?

How the Kremlin plans to utilize crypto to oppress its citizens?

And what is the role of smart contracts in this process?

That’s the topic of our discussion.

Nowadays, there is no conspiracy on crypto use in Russia for sanction evasion. Russian authorities publicly admit the fact and fiercely call for crypto applications to circumvent Western sanctions. It includes the interests of third countries with their attempts to mitigate risks of secondary sanctions for partnership with Russia.

Recently Russian authorities revealed prospects to launch crypto exchanges within the country. In short, the Kremlin wants to target citizens inside the national borders with a new wave of financial pressure while assuring an active sanction circumvention.

So, there are two groups of consequences since the launch of approved crypto exchanges in Russia, both outside and inside the country.

1. Outside the country these exchanges provide:

1.1. extensive coverage for the regime to execute cross-border transactions under the ordinary citizens’ agenda (based on the galloping number of transactions, crypto anonymity’s feature and smart contracts’ asset obfuscation techniques);

1.2. a direct channel for the Russian authorities to interfere in global markets, overcome international sanctions and finance an aggressive war machine.

2. Inside the country they constitute:

2.1. a wider state control over citizens’ finances (primarily, to reveal hidden cash savings and unstructured data on crypto possessions) given the plumbing national currency and complete digital surveillance system in Russia;

2.2. an enlarged tax base (from crypto earnings) to cover the budget deficit of the shrinking Russian economy.

Let’s dig into peculiar details of a process within the crypto area linked to Russia.

The same crypto obfuscates asset origin within the democratic world while giving authoritarian regimes the tool for total financial control over their citizens. But how is that possible?

Even on the base level, the answer is straightforward. Within authoritarian regimes, crypto exchanges and other intermediaries share user data with the authorities. So that the government knows the owners’ identity for every blockchain account. Disregarding the blockchain accounts to be anonymous for external observers (such as the general public or international regulators), authoritarian regimes are the default holders of the data. This refers both to centralised (CEXs) exchanges with obligatory know-your-customer (KYC) and decentralised (DEXs) ones that above all store the information on user bank accounts’ data tight to crypto trades.

Moreover, boosting ordinary user transactions within the authoritarian regime complicates the control over the imposed international sanctions. Easier to trace the limited number of transactions, while an intensively loaded transactional pool catastrophically overburdens the process of real-time asset tracking.

In addition, crypto anonymity’s feature makes limits on single-account transactions non-feasible. The same person or entity could run numerous blockchain accounts and neglect formal restrictions. Besides, crypto money laundering is relatively faster and cheaper (for an unlimited cross-border scale with little need for physical cash transmission between geographical areas).

Moreover, smart contracts beyond their innocent title represent a quite resulting tool to obfuscate asset origin worldwide. In this instance, three major features of smart contracts need to be covered.

First, it’s an infrastructural aspect of transaction execution. In plain words, transactions that are sent through smart contracts are untraceable through the public blockchain ledger. Simply put, there are no direct initiator-recipient links available, only account updates on all sides of the interaction.

Albeit one can retrieve the transactional history of smart contracts from either state variables or blockchain explorers, it’s not always the data they expect to receive. This data is about final transactions sent by smart contract to the ledger but not the initial ones that are processed and bathed off-chain. Smart contracts may apply generalisation that eliminates the sense of regulatory tracing on the blockchain. Moreover, the chain of transactions could include several smart contracts that hide end-users behind the payments involved.

Second, smart contracts are the base for so-called smart accounts — the form of multisig (multi-signature) blockchain accounts. They represent an instrument for one account to be owned and managed by multiple users that helps to obscure direct links on transaction execution.

And, finally, smart contracts rely on the third-parties called oracles to provide all the off-chain data including token price. Given the fragmented crypto markets and high price volatility, such data provision is the source for market manipulation. These crypto oracles could vary price tokens supplied to smart contracts on their own so insider trading is no stranger here.

As for the inside repressions through crypto in Russia, the state-controlled crypto exchanges aim to extort cash savings from citizens amid the depreciation of the national currency and economic turmoil. It also serves to structure centralised data on crypto savings, yet previously this data could be gathered from the crypto intermediaries under request. Furthermore, it tends to boost the tax base as an extra income source for the state budget.

To sum up, in the fight between autocracies and democracies, crypto is loyally on the dark side of the former…

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 120) by Dr. Olga D. Khon

Russian authorities officially approve crypto mining as the next bet on crypto to foster sanction evasion. At the same time, many economists still underestimate the threats the crypto assets bring to the global financial system.

The major reason is a loyal perception of crypto under the same risk framework applied to mainstream finance. Yet, fifteen years since the crypto arose, the problem remains: the crypto industry goes far beyond the vast legal domain of financial markets and international regulation.

Several discrepancies mark crypto as not only purely speculative assets but a priority tool for a wide range of criminals to finance their illicit activities on an unlimited cross-border scale.

First and foremost, it refers to the transaction execution process (e.g. when users buy and sell crypto tokens) that infrastructurally differs from trading on mainstream exchanges. The process technically restricts equal investor rights for all market participants along with the obligation for everyone to follow the rule of law.

In brief, criminals can easily execute trade deals and cash out crypto worldwide beyond the significant risks of being traced by regulators. It occurs from so-called smart contracts’ applications within the crypto domain (like mixers, bridges, layers-2, stablecoins intermediation, asset tokenisation, etc.) which process initial transactions off-chain (with no ledger records).

Second, the different cost levels of tokens’ acquisition between blockchain developers and ordinary market participants. For instance, the same Bitcoin (BTC) or Ether (ETH) could be collected either by a market purchase or a reward for block producing like mining (on Proof-of-work, PoW) or staking (on Proof-of-stake, PoS). The former requires paying the market price for each token (within transaction costs involved), while the latter only refers to participation costs for block producers (such as energy use, internet bandwidth, hardware and software contribution). In other words, for top market cap tokens, such as BTC and ETH, the market price is higher than mining or staking (block production) costs. The higher the market price, the greater the discrepancy, and vice versa. So, it’s one of the reasons why ordinary investors could hardly make a fortune on crypto trading

And, finally, every token transfer (e.g. crypto trades) evolves from the same block production process where miners and stakers (the title of block producers on PoW and PoS protocols, respectively) pick and execute transactions within blocks on the blockchain. Simply put, miners and stalkers dominate and construct the crypto area whilst beyond their activities there is no crypto at all.

From the Russian perspective, the crypto industry works on sanction evasion to provide financing for its brutal and aggressive war against Ukraine. Well, crypto again proves its role as a favorite of Russian benevolent authorities the Democratic world should decisively confront.

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 117) by Dr. Olga D. Khon

Russia publicly calls for immense crypto use to boost sanction evasion [5]. This crypto mess took place the same month Russia executed the treacherous attack on the biggest Children’s hospital in Kyiv — the Okhmatdyt.

While many people actively participate in the crypto primarily used to finance Russia’s war machine, let us recall one day in history. The very day the little kids with cancer diagnosis in Ukraine lost “their last Hope” by the strike of Russian cruise missile Kh-101 [2].

Tuesday, the 8th of July 2024. It was morning at the Department of Oncology when Russia launched its attack on the Okhmatdyt buildings. In tragic minutes Ukraine’s biggest paediatrics facility was severely damaged [6]. The 400 square meters (4300 sq. ft.) [3] of modern and technologically equipped buildings were destroyed.

In peacetime, before the Russian full-scale invasion of Ukraine, the Okhmatdyt performed more than 10,000 surgeries a year including bone marrow transplantation and treatment of haematological diseases. The hospital was equipped with 720 hospital beds and treated over 20,000 people annually [7].

According to experts, It will take months to restore the Okhmatdyt facility [1]. On the day of the attack, Russia hit not only 627 children receiving treatment [4] but thousands and thousands of little patients to be saved at the Okhmatdyt from the insidious disease.

This cowardly crime against the most defenceless and critically ill kids was committed by Russia whose authorities loudly appeal to the crypto. So crypto remains the last financial readout for Russia.

And this proves the effectiveness of sanctions within mainstream finance (or TradFi) based on science. While pseudoscientific crypto remains the barbaric tool for criminals and terrorists.

Well, it is time for all crypto proponents and fans to admit that they do support the Russian aggression and war crimes against Ukraine, the crypto agony amid the war.

References:

[1] The AP, “Russian missile attack on Ukraine’s largest hospital complicates treatment of kids with cancer”. July 11, 2024

[2]BBC, “Children’s hospital hit as Russian strikes kill dozens in Ukraine”. July 8, 2024.

[3] CEPA, “Hospitals: Where Russia Kills Children”. July 10, 2024

[4] Euronews, “Kyiv children’s hospital partially reopens week after Russian missile attack”. July 16, 2024

[5] FSTech, “Russian Central Bank endorses crypto for sanction evasion”. July 4, 2024

[6] The Guardian, “No words for this”: Horror over Russian bombing of Kyiv children’s hospital. July 9, 2024

[7] The Okhmatdyt official website. July 2024

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 116) by Dr. Olga D. Khon

These days a few crypto figures attacked the US government for allegedly “killing innovations”? But why now?

Foremost, among these voices are former and acting participants of the Ethereum Foundation, the operation of which silently backs the aggressive interests of Russia since its origination (see Note 69. «Blockchain Origination: Timing Does Matter?..» and Note 102. «Crypto Backs the Interest of Russia»). With Russia fiercely dreaming of destabilizing all the grounds of the democratic world, crypto remains its very weapon.

So, we should clarify: if crypto is about innovations then it’s primarily criminal innovations to foster illicit finance and criminal activity worldwide. Money launders, terrorists, human and drug traffickers, corruptionists, war and other criminals, are all praising crypto.

Yet the crypto industry is famous for claims chanting itself. But losses ordinary investors suffered from the current Bitcoin Halving is another tragic example. Three weeks later, the Bitcoin price is at the one-month low and remains below the level fixed on the Halving day.

Unfortunately, thousands and millions of ordinary investors who lost their savings in the Bitcoin Halving fraud were victims of years-long manipulation. This time crypto promoters try to cover their criminal activity by shifting the public attention to targeting financial regulators so that Russia-backed crypto got its “Go” code to attack…

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 107) by Dr. Olga D. Khon

China’s Xi visits Europe (France, Serbia and Hungary), and crypto endorses it. Prices are on a short rise this weekend outside major trading sessions. But have you noticed that China was amongst the first countries that severely banned crypto almost a decade ago?

Well, crypto, unfortunately, is quite a resultive tool to destabilise societies and financial markets around the globe.

No secret crypto is famous with autocrats for its destructive activity against democratic values and the Free world. We’ve seen enormous money laundering conspiracies executed throughout crypto with criminal proceeds facilitating corruption, terrorism, drugs and human trafficking.

Indeed, Russia is a mastermind of crypto but Russia has been a vassal of China for a long time.

For how long will the crypto remain the weapon of autocrats?

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 106) by Dr. Olga D. Khon

This Wednesday (May 01, 2024), the US Treasury imposed the next sanctions against Russia. They aimed to “degrade Russia’s Military-Industrial Base and Target Third-Country Support with Nearly 300 New Sanctions”.

And, quite expectedly, crypto prices shortly began to rise. We’ve observed the same pattern several times since the Russian full-invasion of Ukraine commenced. In brief, Russian authorities, each time suffering from sanctions that narrow their living space, try to channel their capital through crypto. In the short run, it boosts the demand and, thus, crypto prices. And, bet, there is nothing accidental in the following painful descent.

Such repeated price dynamics prove two things: 1) Crypto is the major tool for sanction evasion on a global scale for Russia; and 2) International sanctions against Russia do obtain the effect of inexorable forces, indeed.

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 105) by Dr. Olga D. Khon

Crypto chants Bitcoin halving as a miraculous fetish for getting rich quickly, inviting more and more affected in crypto. Albeit halving occurs on the Bitcoin blockchain every 210,000 blocks or approximately every four years, this fourth halving has gone differently.

Indeed, during the current halving resumed on Saturday (April 20, 2024), the play on emotional exaggeration to boost public misguidance for anticipating price jumps was of little help. When you recall the last two pre-halving months, the bitcoin (BTC) price confronts any steady upward trend. It stuck in a wild rally of ups and downs (between $55k and $74k). It is hard to imagine how many ordinary investors lost all their money. Notably, BTC price substantially fell the week before halving.

It happened to disregard the date and approximate time of halving are known for sure — the block number (or height) 840 000. Given the speed of creating one block on the Bitcoin blockchain equals 10 minutes, the halving timing is a piece of public information disclosed since its creation.

Even after this halving had been formally recorded at 03:39 UTC on April 20, 2024, BTC price hesitated the following twelve hours (till 15:30 UTC) to reflect the first sign of growth (the same time the U.S. House of Representatives started to vote on long-anticipated Ukraine aid bill and the seizure of Russian frozen assets). This price volatility reminds us more of a manipulation done during the illiquid crypto market on weekends rather than a genuine post-halving effect.

So, crypto as the very last resort for sanction evaders, terrorists, and war criminals, will shortly face tremendous manipulations, unfortunately, at the expense of ordinary investors and the general public more broadly. We’ll foresee their desperate attempts to revive the Bitcoin halving as the major crypto myth inevitably crashed.

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 102) by Dr. Olga D. Khon

Russian full-scale invasion of Ukraine and 17-months ongoing war force us to focus on the exact timing of origination for the dominant blockchains. Namely, the interconnected network of Bitcoin and Ethereum…

07 August 2008: Russia aggressively attacked Georgia. The five-days tension led to 20% of Georgian territory to be occupied by Russia till the very recent days.

18 August 2008: the domain “bitcoin.org” was registered, marking the stage of sooner creation of the first so-called cryptocurrency.

31 October 2008: Bitcoin’s Whitepaper initially appeared in public.

….

11 January 2014: Ethereum’s whitepaper was published (allegedly conceived in late 2013).

20 February — 26 March 2014: Russia attacked Ukraine and annexed the Crimean Peninsula.

…

February 2022: Rapid growth of inflows to Tera’s ecosystem within its stablecoin TerraUSD along with Ethereum staking.

24 February 2022 — … : Russia began the barbaric full-scale invasion of Ukraine.

09–10 May 2022: Following the asset boosting, Terra’s ecosystem has crashed.

So, whether the timing does matter in blockchain origination is up to the readers to decide…

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 69) by Dr. Olga D. Khon

.Central bank digital currencies (CBDCs) were always perceived as cutting-edge financial innovation.

Until the case reached a “digital ruble”…

Such a duo of rotted ruble and the mystic “Russian digitalization” (see also Note 63. «Crypto in Russia: Prosecute Not Donate»).

Since the full-scale war against Ukraine within international sanctions and global isolation completely has the ending of the Russian economy.

So, digital ruble is an attempt for invisible transition of remaining capital outside the country utilising illegal crypto channels (incl. assets tokenization, interoperability tools, smart contracts, etc.).

Simply put, in the hands of war criminals, those popular crypto entities are decisively turned into the global criminal platform. This led not only to their personal enrichment but a long-term financing for a brutal war machine.

Apparently, ruble has already done the same hit before. While crypto, in particular, enabled criminal money to intervene directly into the legal part of the global financial system. Thus, through the assistance of the digital ruble, the entire financial world would be flooded with dirty money flows to be cleaned up for a long time to go.

In fact, the Russian version of CBDCs today is a sanctioned ruble runned-through an international crypto laundry for subsequent illegal conversion to the most liquid currencies in the world.

It reminds of a plot of the tale about Buratino and the Field of Wonders. Where Cat and Fox persuaded trusting Buratino to earth the coins and the Money Tree would grow.

Should digital ruble succeed in its homegrown trick to expand to Western markets, the only beneficiary would be the ruling elites. As for Russian people, they’d get colourful advertising and the next expropriation of any savings left.

Here is, unfortunately, “the Field of Wonders for a Dictator”…

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 65) by Dr. Olga D. Khon

It seemed Russian crypto promotion has hardly anything to surprise. Meanwhile, the issue came from the side nobody expected.

The next video instruction shared on the web guides newbies on how to buy crypto in Russia. The clip is rather superficial and could be a “garbage” one, if not pay attention to its creators. And this is a solid team of Russian opposition in exile.

Let’s try to point out the correct emphasis here.

First of all, the purchase of cryptocurrencies in Russia, under international sanctions imposed, is itself an intentional action for sanction evasion. And yet, the team from outside of Russia calls for such violations — in the name of so coveted crypto donations.

Second, it’s a quite risky path for any resident of Russia. The scheme suggested under the dictatorship could not probably protect sponsors from prosecution by the authorities. Even more, it plays on the security forces’ side.

The authors refer the viewer to the aggregator of shadow crypto exchanges serving Russian users within the country. And these services accept cash foreign currencies and rubles through the cards of sanctioned Russian banks.

In short, the criminal popularity of crypto is based on the option of account anonymity. The identification of real owners following their crypto wallets is a rather complicated task.

Although the dictatorship makes its own adjustments. Thus, every bank card transaction is already in the folder of security agencies. The shadow crypto exchanges are ready to share information covering data on crypto wallets and user transactions. So that names of the entire opposition crypto donators would reflect on the supervisory display of authorities.

Besides, these kinds of crypto exchanges depict the Russian authority itself — the collector of exorbitant commissions and unfavourable conversion rates. Anyway, the regime neutralises the anonymity of Russian crypto owners by default.

Worth to be noticed, the authors of that video do not provide any know-how. They simply appeal to one of the existing practices in Russia so far. But become the tough crypto promoters by application of their own media channels. Thereby deeply compromising the security of their sponsors to be severely prosecuted. And to those promo claims “execute not, donate” from Russia the better answer would be: “Execute, Not Donate”!..

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 63) by Dr. Olga D. Khon

If you’ve ever thought that the crypto world encourages the evasion of international sanctions, you aren’t alone. And here is the new proof.

Currently, news outlets reported that Iran and Russia are planning to launch a gold-secured token for the application at their foreign trade settlements. Apparently, it would be a new stablecoin, the originators said.

Well, guess, issuing a stablecoin is not a big deal here, while it fails within the sanctioned borders.

Meanwhile, precise attention of the international regulatory community should be paid to the particular design applied. Above all, breach aspects referred to underlying infrastructure (e.g. the cross-border geography of nodes, multilateral participants involved in pseudonymity features, distribution of economic incentives, etc.) and interoperability loopholes (like those achieved through token wrapping, cross-chain bridging, off-chain mixing, and other techniques).

Thus, critical warnings would come from the stack of operations aimed at illegal interference with the global financial system throughout the crypto industry. And for worst — to fund criminal activities worldwide.

Indeed, there should be no way for sanction evasion done by banned state regimes! And it is more than important in times of global and local wars!

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 49) by Dr. Olga D. Khon

The paradoxical situation is developing under crypto sanctions on dictatorships worldwide. And we are talking about the ban of users according to their national affiliation.

On the one hand, they aimed to prevent dictators’ aggression and war. But on the other, these measures do not target the spot directly.

Simply put, such attempts primarily refer to the activity on so-called centralised exchanges (CEX), where somehow know-your-customer (KYC) policies are implemented. Thus, here we mainly deal with sanctions on regular users whose citizenship could be easily identified.

While a bunch of money laundering and other deals covering criminal agendas occur on decentralised exchanges (DEX) and through other over-the-counter (OTC) manipulations, it’s the very place where the national residence is blurring.

Therefore, for crypto sanctions to become more efficient, above all, regulators better to focus on the criminal institutional entities (among multiple DAO foundations and blockchain originators), which are hiding under the label of international ones so far.

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 38) by Dr. Olga D. Khon

In recent days, we’ve been witnessing the discussion of the ruble and its historical maximum against major foreign currencies since 2015. The argument is strongly applied to falsely convince the world and Russian citizens that the economy is overcoming war expenditures and Western sanctions.

In fact, as I see it, such artificial resilience of national currency was precisely amplified by capital control measures.

Well, the ruble jumped up to 55,7 RUR per one USD. Still, I argue, so seemed-attractive exchange rate reflects nothing, but the pure result of the supply-and-demand law that existed under authoritarian regulation.

Let's cover the RUR/USD and share with you one of the regulatory tricks imposed.

Since the Russian invasion of Ukraine began, citizens were restricted to withdraw 10 000 USD in total. To cash out the rest, it should be swapped into rubles first. The prohibition was forced till September 9, 2022. To remind you, the first financial sanctions were imposed in March 2022. Russia was cut off from global payment systems such as Visa and Master Card, main state banks were sanctioned, and the USA also banned any supply of US dollars to the aggressor’s country.

The panic among ordinary citizens occurred, leading to USD withdrawals and the wiping out of RUR balances. The tremendous collapse began in national financial markets, as well. The demand for USD spiked enormously, and the ruble was balanced around 150 RUR/USD. Besides, the exchange spread jumped up to 30% after the Bank of Russia stopped to restrict its ceiling. Commercial banks tried to attract deposits in foreign currency by greater two-digits rates to stop bank runs but failed.

Thus, in a later war reality, to continue holding foreign currency, citizens in Russia had to pay additional commissions to commercial banks with almost zero deposit rates. Rare those who tried to buy USD and cash them out succeeded since the fresh law allowed them to redeem only the foreign currency acquired prior to March 9, 2022. Right before the massive financial sanctions were revealed on March 11, 2022. The very day the Russian ruble became completely worthless.

There is a tiny opportunity to transfer savings abroad but just to the bank accounts registered far beyond the war began. The financial tool the very few middle-and-beyond class of Russians possessed.

So, would the ordinary citizen be able to purchase USD in reality? It neither could be cashed out nor used for payments, both inside the country and abroad. Moreover, it required additional expenditures on holdings.

What does reflect such bought-in-aggressive-Russia USDs? Even not USD but the solely electronic registry of USD, unrecognized outside Russia. Look quite vain efforts to acquire. Evidently, the demand for USD diminished, that’s depicted in the strengthening RUR/USD exchange rate.

It also matters that the Bank of Russia has shifted from the free-market float to the established exchange rate. This move has already erased the true economic value of this indicator.

Similar conclusions should be made about the Bank of Russia’s key rate and inflation slump, stated in Russia nowadays. Apparently, the ruble is dead but artificially reanimated for the national public to calm down and to revive the state propaganda. That’s for sure! Nonetheless, for how long could it last?

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 17) by Dr. Olga D. Khon

Yes, the modern world is on the edge of recession. While Russia is facing sovereign default.

Financial sanctions have already alarmed the bell! The consequences for the Russian economy are completely damaging!

But what the country beyond external sources of financing stands for?

Russia was implemented in the international financial system for a dozen years. Meaning vast opportunities for country-side borrowings, which left behind the national economy is inevitable, and couldn’t hold even three months — on the recent level.

In a more promising approach, fossil fuel revenues would hardly cover just half of the state budget. To find resources for the second one — under sanctions and the default condition — is purely infeasible.

The case has been exacerbated by the frozen reserves of the Bank of Russia. It’s more than 300 bln. USD — the amount equivalent to the annual state budget! There is no chance the money would ever be back to Russia.

All the efforts the Russian financial regulator took have a short-term effect — amid growing inflation and rising interest rates around the globe*. We’re going to be not observers but involuntary participants of these dramatic events…

Footnotes:

*This Friday, April 09, major stock markets closed in red under the Fed news. On Wednesday, April 07, the Fed March meeting minutes were published. Revealing the prospects to cut the Fed’s balance sheet — by 95 bln USD per month within the intense to raise the interest rate by 50 basis points in May 2022.

Published on Medium.com  "TradFi and DeFi: Broaden Horizons" (Note 15) by Dr. Olga D. Khon