Bitcoin and other cryptocurrencies have made it easier than ever to move money around the world without the help of traditional banks, but that doesn’t mean they’ll do much to help Russia sidestep international sanctions.

Experts in money laundering on Friday said that it would not be realistic for Russia to switch to cryptocurrencies on a large scale to move money across borders, even if it might work for smuggling small amounts into or out of the country. 

Russia may still try to launder money that way, especially if the United States and European Union impose much stronger sanctions over the crisis in Ukraine, but a sharp turn toward cryptocurrency hasn’t been very successful for other outcast countries such as Venezuela that have tried it, experts said. 

“The fact is, these sanctions are going to be potentially crippling and could become more crippling, and there’s nothing crypto can do about that,” said Ari Redbord, head of legal and government affairs at TRM Labs, a cryptocurrency compliance firm. 

The reasons have to do with the severe potential consequences for people outside Russia who conduct transactions in violation of the sanctions, as well as the radical transparency that’s one of the hallmarks of virtual currency. 

Online exchanges, though they may market themselves as challenging the establishment, have also developed modern compliance departments similar to those at banks, experts said. 

“Oftentimes you hear that the crypto industry is this unregulated Wild West, and that’s just not true in the U.S.,” said Redbord, a former federal prosecutor and Treasury Department official.

Cryptocurrencies have had an air of mystery and lawlessness since the development of bitcoin as the first peer-to-peer electronic cash system more than a decade ago. Its proponents hail bitcoin as free from the control of any authority and a competitor to the US dollar and other government-backed currencies. Some think it might help bring about world peace.

Moving and trading cryptocurrencies through online exchanges is fast, and there’s a record of each transaction stored on a blockchain, a ledger that anyone can read but no one can fake or destroy because it’s stored on a distributed system of computers. 

But the same qualities that make cryptocurrencies attractive to some buyers could also make them a terrible choice for money laundering. 

“When you look at crypto, it’s a market that at first glance looks like a great way to hide sources of funds and transfer funds across the globe,” said Salman Banaei, head of public policy for North America at Chainalysis, a cryptocurrency compliance firm. 

“The issue, however, is that transfers of cryptocurrency can be followed in real time,” he said. “In the last few years there’s been a number of technological breakthroughs in terms of tracing crypto activity, both simple activity and through mechanisms that are intended to obscure the source of funds.” 

Banaei said that Russia, in trying to move money around the world, is likely to turn first toward traditional forms of money laundering, with shell companies and shady banks. A second option more appealing than cryptocurrency, he said, would be trying to launder money through another traditional foreign currency, such as China’s yuan. 

Zachary Goldman, a partner at the law firm WilmerHale, said cryptocurrencies offer investigators unprecedented transparency, and in some ways the investigations are easier than those involving cash dollars or other physical objects. 

“If you steal a diamond watch, there’s only one diamond watch. But if you steal $200,000 in crypto, that can potentially be accessed through a wide range of mechanisms,” Goldman said. 

The U.S. government has stepped up enforcement against cryptocurrency-enabled money laundering even in just the past year. 

In September, the Treasury Department for the first time placed a digital currency exchange on its list of sanctioned people and organisations. The exchange, Suex OTC, was registered in the Czech Republic but had strong Russian ties, and US officials said it facilitated ransomware payments. They sanctioned a second exchange, Chatex, in November. 

Redbord, the former prosecutor, said those actions could be the start of a bigger enforcement effort. 

“There’s a whole ecosystem of these things. They’re a tiny, tiny fraction of the overall crypto economy, but they live and move in all sorts of jurisdictions,” he said. 

In a warning to every digital coin business, the Treasury Department in October published a 28-page guide to sanctions compliance specifically for the virtual currency industry. It warned that they have an obligation to block access to virtual currency that violates sanctions, and that they face consequences including a criminal investigation if they don’t. 

This month, the Justice Department announced the seizure of $3.6 billion worth of cryptocurrency, the department’s largest financial seizure of any kind ever, and the arrest of two people it said stole the bitcoins in 2016. 

“Cryptocurrency is not completely anonymous. There are ways of looking at related transactions to figure out who people are,” said Robert Clifton Burns, senior counsel at the law firm Crowell & Moring and a specialist in sanctions law. 

Burns said the sweeping nature of the US sanctions so far, with potentially more on the way, would likely persuade exchanges and other cryptocurrency businesses to clamp down on any activity that could lead to a violation. That would mean Russians with cryptocurrency may have trouble unloading it. 

“I don’t think people are going to take the risk of scrutiny by engaging in large scale, systematic transactions of cryptocurrency with the Russians,” he said. 

There is a precedent for countries to shift their systems toward bitcoin or other virtual currency in the face of US sanctions. Iran has tried mining bitcoin, North Korea has been accused of stealing vast amounts of cryptocurrency and Venezuela has created its own virtual currency, the petro. 

Experts said none of those countries has solved the problem of how to easily launder the digital coin, but that Russian President Vladimir Putin may still push for something similar under more drastic circumstances. 

“If Russia is prevented from exporting its gas or oil, it might instead use it to mine cryptocurrency,” said Tom Robinson, chief scientist and co-founder at Elliptic, a company in London that advises businesses on complying with crypto regulations. 

“Iran has already done exactly this — effectively ‘exporting’ millions of barrels of oil in this way.” 

So far, though, the sanctions on Russia are different from those on Iran, which faces restrictions on its sale of oil.

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