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• Countries like Russia could use the crypto ecosystem to sidestep sanctions in several ways, the IMF has said.

• Russia could use its embargo-hit energy resources to mine bitcoin for hard cash, it suggested in a report.

• Laws and regulations for foreign exchange should be amended if needed to cover crypto alongside traditional assets, it said.

Russia could use the crypto ecosystem to get around Western sanctions in several ways, the International Monetary Fund has suggested — including by using its embargo-hit energy sources to mine bitcoin.

In its recent financial stability report, the IMF laid out how sanctioned countries like Russia could use crypto to their benefit, and advised policymakers around the world to consider amending laws to take crypto assets into account.

Russia is grappling with crippling sanctions that have cut it off from the global financial system and the dollar after it invaded Ukraine in late February, and European Central Bank chief Christine Lagarde and others have warned crypto is being used to sidestep the measures.

"The war in Ukraine has brought to the forefront some of the challenges that regulators face in terms of applying sanctions and capital flow management measures," the IMF said in the report published Tuesday.

"The crypto ecosystem, however, could allow users to circumvent such requirements through several means," it added.

One way is to use exchanges and other crypto providers that don't comply with sanctions, or that don't scrupulously carry out due diligence. Using decentralized exchanges or technology such as privacy mixers to make transactions more anonymous is another.

Countries should make sure crypto can be brought under the same capital control umbrella as traditional assets, the financial stability watchdog urged.

"Laws and regulations for foreign exchange and capital flow management measures should be reviewed and amended if necessary to cover crypto assets, even if they are not classified as financial assets or foreign currency," it said.

Bitcoin mining

Cut off from the leading foreign currency, Russia could turn to bitcoin mining to generate hard cash from its unwanted energy exports, the IMF suggested. The US has banned Russian energy imports, and pressure is building on Europe to bring in its own oil embargo.

Russia is a major player in the oil, gas and coal markets, but many traders have shunned its energy exports in face of the measures.

Over time, sanctioned countries could allocate more resources toward evading sanctions through bitcoin mining, the IMF said, echoing warnings made by some analysts.