tl;dr
The US government is considering imposing sanctions on certain Chinese banks to disconnect them from the global financial system, due to their role in supporting Russia's military capabilities against Ukraine. If these sanctions are implemented, there is speculation about whether China would turn to...
The US government is considering imposing sanctions on certain Chinese banks to disconnect them from the global financial system, due to their role in supporting Russia's military capabilities against Ukraine.
If these sanctions are implemented, there is speculation about whether China would turn to cryptocurrency as a workaround, as seen in the cases of Venezuela and Russia evading US sanctions using Tether (USDT).
Although China claims that it has not provided weapons to Russia since the Ukraine invasion began, the US argues that the export of dual-use items like chips and machinery has critically strengthened Russia’s military.
Historically, countries isolated from the global financial network have turned to cryptocurrencies as a workaround. For example, Venezuela’s state-run oil company, PDVSA, has shifted to using Tether (USDT) to evade renewed US sanctions.
Similarly, Russia has leveraged cryptocurrencies to sidestep Western sanctions. Russian firms are reportedly using Tether’s USDT to acquire vital components for military hardware. This strategy facilitates transactions that conventional financial systems less easily trace.
Given these developments, growing speculation exists about China’s potential response to being similarly isolated. Traditionally, China has been strict in regulating cryptocurrencies, driven by concerns over financial instability and unauthorized capital outflows.
The possibility of Chinese banks facing exclusion from the global financial system could prompt a reevaluation of this stance. Particularly, it could encourage a more favorable regulatory approach to crypto.
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