Crypto’s Top Privacy Coin Is Spiking Wildly, and Sanctions Busters May Be the Culprits

The biggest, most effective privacy coin was on a six-month slide until Feb. 24, when it began a steady climb, rising from around $235 to $335.

While there a lot of things that can affect the price of any cryptocurrency, it’s probably worth noting that a token designed expressly to hide crypto transactions — and keep law enforcement from tracking them across blockchains — is up more than 40% since Russia invaded Ukraine and U.S.- and European Union-led sanctions sent the aggressor’s economy tumbling.

That’s especially notable given how hard those sanctions hit some of the richest people in the world, Russia’s regime-backing oligarchs, who have seen their funds frozen and half-billion-dollar yachts seized.

See also: PYMNTS Crypto Basics Series: Is Bitcoin Really Anonymous and How Can Law Enforcement Track It?

So, are they using privacy coins to get around those sanctions? Some — most notably Sen. Elizabeth Warren (D-Mass.) — say yes, obviously.

However, most of the crypto industry says no, pointing out that while privacy coins like Monero try to hide the size and source of transactions — largely using tools like mixing real coins in with fake coins to obscure the real amount and sending them through dummy addresses in smaller amounts — the total volume of transactions just doesn’t support the idea that oligarchs are pumping billions into them.

Related: Crypto’s Impact on Russian Sanctions Could Lead to Tougher Regulation

Which, of course, leaves several options, most notably the possibility that the oligarchs may know this and are using privacy coins and mixing services in smaller transaction amounts.

Read more: PYMNTS Crypto Crime Series: When Privacy Counts, Crypto Users Turn to Mixing Services

Another possibility is that some oligarchs already had a fortune in bitcoin built up by the time sanctions hit. And remember, some have been in place for years, with a much lower profile.

Too Little

The same transaction volume argument is true of mixing services, which obscure transactions by bundling them together, Chainalysis co-founder and Chief Strategy Officer Jonathan Levin told Warren during a March 17 Senate Banking Committee hearing on the role digital assets play in financing illegal activities.

See also: Use in Ukraine Lends Some Luster to Crypto’s Dark Side in Senate Hearing

The overall amount transferred into monero, or XMR, is visible. As such, blockchain information sites like CoinMarketCap can say that since then, the daily transaction volume has largely been in the $150 million to $250 million range, with a few days going higher, including a $527 million spike on April 12.

The price of monero, which calls itself a “private, decentralized cryptocurrency that keeps your finances confidential and secure,” is up 35% in the past month alone, compared to bitcoin’s 6%. Since Feb. 24, its market capitalization has gone from $2.66 billion to $4.29 billion, according to industry source CoinMarketCap.

So someone is sure buying a lot of monero, and plenty of buyers are holding onto the privacy token rather than just shuffling funds through it — which is particularly useful, as the longer funds are kept in XMR, the harder it is to figure where they even might have come from.

Bitcoin, by contrast, has seen its market cap stay in roughly the $700 billion to $800 billion range, with daily transaction volume generally around $25 billion to $30 billion.

For the Little

Another possibility is that a lot of other privacy-minded buyers — including but not limited to ordinary Russians hurt by sanctions — are stepping up Monero purchases.

“People around the world are beginning to realize that your money is not actually your money if it’s held in a financial institution with oversight from the government,” Jeff Dorman, chief investment officer of digital asset investment firm Arca, told CoinDesk. “At best, it’s someone else’s liability to you that you may or may not be able to recover.”

Certainly, those who are listening in the crypto community are hearing that message.

Related: Crypto Caught in Crossfire as Canada’s PM Trudeau Invokes Emergencies Act

In explaining why U.S. crypto exchange Kraken would not ban unsanctioned Russian customers, CEO Jesse Powell tweeted, “Bitcoin is the embodiment of libertarian values, which strongly favor individualism and human rights.”

Cutting off all Russians would violate that, Powell said, noting that even legal orders that his company would have to follow “could come from foreign states, like the US, as a weapon to turn the Russian populace against its government’s policies,” as well as Canada, which ordered some crypto wallets frozen during the recent anti-government protests.