Pro Tips
Basics
What Is a Trade Sanction, and How Does It Affect Forex and Crypto Markets?
Aug 8, 2025
Consider waking up one day to find that everything you buy costs twice as much as yesterday. No, it’s not a dream. It's hyperinflation, and it can happen all too quickly when a nation’s economy implodes. To mitigate the damages of hyperinflation, a government may intervene in its markets, but this is just one scenario that can explain why the government intervenes in markets.
In this guide, we’ll explore the various reasons why a government would want to intervene in its markets, including how it affects trade and the economy as a whole. Understanding why a government intervenes in markets and Economic Interdependence can help you predict the future of forex and crypto markets when a trade sanction is imposed on a nation.
Table of Contents
What is a Trade Sanction?
A trade sanction is a government-imposed restriction that limits or blocks economic transactions between one country (or entity) and another. These restrictions are often used for political pressure, economic punishment, or national security protection. Trade sanctions impact global financial systems, trade flows, and currency values, making them critical for forex and crypto traders to monitor. They can weaken a country's economy, cause currency devaluations, and increase demand for alternative financial solutions like crypto.
Why Do Governments Impose Trade Sanctions?
Governments and international organizations like the United Nations (UN), European Union (EU), and U.S. Treasury (OFAC) impose trade sanctions for several reasons, including:
Punishing a Country for Political or Military Actions
Sanctions are used to pressure governments into changing policies or stopping military actions.
Example: The U.S. and EU imposed sanctions on Russia in 2022 after it invaded Ukraine, cutting off Russian banks from SWIFT (the global banking network).
Restricting the Financing of Illegal Activities
Some governments impose sanctions to prevent money laundering, terrorism financing, or arms trading.
Example: The U.S. sanctioned North Korea to prevent its government from funding nuclear programs through international banking.
Protecting Domestic Industries from Unfair Competition
Sanctions can also be used as an economic weapon to weaken competitors or promote local industries.
Example: The U.S. banned Huawei from doing business with American companies, hurting China’s tech industry.
Enforcing Human Rights Policies
Some trade sanctions are imposed on governments that violate human rights or suppress democracy. Example: The EU imposed sanctions on Myanmar after a military coup, cutting off trade in luxury goods and technology.
The Different Flavors of Trade Sanctions
Trade sanctions take different forms depending on their severity and scope. Governments can restrict trade on specific goods, block financial access, or impose full economic embargoes.
1. Import/Export Restrictions
Limits or completely bans the import/export of certain products to/from a sanctioned country.
Example: The U.S. banned the export of semiconductors to China, crippling China’s access to advanced chip technology.
2. Asset Freezes & Financial Sanctions
Freezing the assets of individuals, businesses, or governments to prevent them from using international banks or investments.
Example: The U.S. froze $300 billion of Russia’s foreign reserves after it invaded Ukraine. Iranian leaders’ bank accounts were frozen to prevent them from accessing global financial systems.
3. Trade Tariffs & Quotas
Governments increase taxes (tariffs) on foreign goods to make them more expensive, reducing imports.
Example: The U.S.- China trade war (2018-2020) led to heavy tariffs on Chinese goods, raising prices for American consumers.
4. Financial & Banking Sanctions (SWIFT Bans)
A country is cut off from the international banking system, making it nearly impossible to process global transactions.
Example: In 2022, Russian banks were removed from the SWIFT network, making it difficult for Russia to send and receive international payments.
5. Full Trade Embargoes
The most extreme sanction is banning all trade and economic relations with a country altogether.
Example: The U.S. imposed a complete trade embargo on Cuba in 1962, cutting it off from American goods and finance.
Countries Currently Under Trade Sanctions (As of Recent Years)
Governments and international organizations frequently update their sanction lists based on political, military, and economic developments. Some of the most sanctioned countries in recent years include:
Russia (Sanctions after invading Ukraine in 2022)
Iran (Sanctions over nuclear programs)
North Korea (Sanctions for missile tests and human rights violations)
Venezuela (Sanctions for government corruption and economic mismanagement)
Syria (Sanctions due to civil war and humanitarian concerns)
Cuba (Long-standing U.S. embargo since 1962)
How Trade Sanctions Disrupt Global Markets
Trade sanctions affect the targeted country and create ripple effects in global financial markets, impacting forex, commodities, and crypto.
Currency Instability & Devaluation
When a country is sanctioned, foreign investors pull money out, causing its currency to weaken.
Example: After Russia was sanctioned in 2022, the Russian ruble (RUB) lost 40% of its value.
Inflation & Rising Commodity Prices
Sanctions often disrupt supply chains, increasing the cost of essential goods.
Example: Sanctions on Iran and Venezuela reduced the global oil supply, causing oil prices to spike.
Financial Market Volatility
Significant sanctions create uncertainty in stock, forex, and crypto markets, leading to sudden price swings.
Example: The U.S.-China trade war caused the Chinese yuan (CNY) to weaken, affecting forex traders.
Shift to Alternative Financial Systems (Crypto Adoption Increases)
Individuals and businesses turn to crypto for transactions when a country is cut off from traditional financial systems.
Example: Bitcoin adoption surged in Venezuela and Russia as citizens looked for ways to bypass financial restrictions.
Why Forex & Crypto Traders Need to Track Trade Sanctions
Trade sanctions significantly impact forex and crypto markets, making them essential for traders to monitor. Forex traders must track currency movements in sanctioned economies to anticipate volatility and hedge risks. Crypto traders must watch government crackdowns and capital controls, as demand for Bitcoin and stablecoins often spikes in sanctioned regions. Traders using AI-driven platforms like GoMoon.ai can receive real-time alerts on new sanctions, helping them adjust positions before market volatility strikes.
Related Reading
• How Can Economic Instability Affect You
• Why Does the Government Intervene in Markets?
• What Are Three Threats to the Future of Global Trade
• Protectionism is Sometimes Necessary in Trade
• Protectionism vs Free Trade
How Trade Sanctions Impact Forex Markets
Currency Devaluation & Volatility: The Immediate Effects of Sanctions on Forex Markets
Trade sanctions have a direct and consequential impact on forex markets as they disrupt international trade, reduce currency liquidity, and create volatility in exchange rates. When a country faces sanctions, its currency often weakens due to capital outflows, inflation, and trade restrictions, while the currencies of countries imposing sanctions strengthen as investors seek stability. This section provides a detailed breakdown of how trade sanctions affect forex markets, including real-world examples and key trading considerations.
Trade Sanctions Cause Currency Devaluation & Volatility
When a country is sanctioned, foreign investors pull their money out, leading to:
Capital flight – Investors sell assets, reducing demand for the sanctioned country’s currency.
Trade decline – Export revenues drop, limiting foreign currency reserves.
Inflation & economic instability – A shrinking economy leads to losing confidence in the national currency.
Example: Russian Ruble (RUB) Collapse After 2022 Sanctions
In 2022, Western nations sanctioned Russia after it invaded Ukraine. Central Russian banks were removed from SWIFT, cutting them off from international financial transactions. Investors withdrew capital, leading to a 40% drop in the ruble’s value within weeks. The USD/RUB spiked from 75 to 140, making the ruble one of the world’s most volatile currencies.
Impact on Forex Traders
Traders who shorted RUB/USD before the sanctions announcement made huge profits. The ruble later recovered when Russia forced energy payments in RUB, creating more forex opportunities.
How Sanctions Strengthen Other Currencies
While the sanctioned country’s currency weakens, other major currencies—especially the U.S. dollar (USD), Swiss franc (CHF), and Japanese yen (JPY)—strengthen as investors seek safe-haven assets.
Example: U.S. Dollar (USD) Strength After Russian Sanctions (2022)
As investors fled the Russian market, they moved their capital into USD, causing DXY (the U.S. dollar index) to surge. EUR/USD dropped as Europe faced energy supply risks due to Russian sanctions.
Impact on Forex Traders
Going long USD/JPY or short EUR/USD was a winning strategy as the USD strengthened. Commodity-linked currencies (AUD, CAD) weakened, creating more forex trading opportunities.
Trade Sanctions Disrupt Global Trade & Currency Liquidity
Sanctions Reduce Foreign Currency Reserves Countries under sanctions lose access to foreign exchange reserves, making supporting their currency’s value difficult.
Example
After the U.S. sanctions on Venezuela, its central bank could not access USD reserves, leading to the collapse of the Venezuelan bolívar (VES).
Impact on Forex Traders
Forex traders monitor a country’s foreign reserves to predict potential currency devaluations. If reserves are low and sanctions tighten, the national currency will likely weaken further.
Sanctions Create Black Market Forex Trading
When official exchange rates become unstable, a parallel black market for forex emerges, with rates different from those in the official market.
Example
The official USD/IRR rate is fixed in Iran, but the black market rate is much higher due to the demand for hard currency. The Iranian rial (IRR) is only available for trade outside the country at unofficial rates.
Impact on Forex Traders
Black market exchange rates create arbitrage opportunities and increase currency speculation risks.
Trade Sanctions Impact Commodity Currencies & Global Inflation
Sanctions on Resource-Rich Countries Affect Commodity Currencies
If a sanctioned country is a significant oil, gas, or metal exporter, sanctions reduce global supply, impacting commodity-linked currencies.
Example
When Russia was sanctioned, oil and gas exports were restricted, leading to higher global energy prices. This impacted commodity currencies like CAD (Canadian dollar) and NOK (Norwegian krone), which are tied to oil prices.
Example
USD/CAD Movements After Russian Oil Sanctions (2022): The price of crude oil surged after Russian sanctions, benefiting oil-exporting countries. The USD/CAD initially fell as Canada’s oil revenue increased but later reversed as recession fears rose.
Impact on Forex Traders
Oil price movements impact USD/CAD, USD/NOK, and AUD/USD. Traders who understand commodity-currency relationships can use sanctions as a trading signal.
Trade Sanctions Contribute to Inflation & Forex Market Instability
When a country cannot import essential goods, shortages drive inflation. Inflation erodes a currency’s value, causing further forex volatility.
Example
Zimbabwe’s Hyperinflation Due to Trade Restrictions (2000s-2010s) Trade sanctions restricted Zimbabwe’s access to foreign investment. Money printing caused inflation to hit 89.7 sextillion percent (yes, you read that correctly). Zimbabwe abandoned its currency (ZWD) and switched to USD trading.
Impact on Forex Traders
Inflationary currencies weaken in forex markets. Traders monitor inflation reports and trade restrictions to anticipate forex trends.
How Forex Traders Can Profit from Trade Sanctions
Trading Currency Pairs Affected by Sanctions
Sanctions create forex trends that last for months or years.
Example
Shorting RUB/USD after Russia’s SWIFT ban. Longing USD/JPY as a safe-haven move.
Hedging Against Currency Devaluations
Traders can use forex options or futures to hedge against currency drops.
Example
If traders expect the Iranian rial (IRR) to weaken further, they can buy USD or gold-linked assets as a hedge.
Monitoring Central Bank Interventions
Central banks often intervene in forex markets to stabilize a sanctioned currency.
Example
Russia forced gas buyers to pay in RUB, stabilizing the ruble after initial sanctions.
Using AI & Economic Tracking Tools
AI-powered tools like GoMoon.ai help traders track real-time sanctions, forex liquidity shifts, and inflation spikes.
Example
If GoMoon.ai assigns new sanctions a high impact score, traders can anticipate major forex volatility and adjust positions accordingly.
Related Reading
• How Does Election Affect Stock Market
• How Does Inflation Affect the Stock Market
• How to Deal With Market Volatility
• How Does War Affect the Stock Market
• How Does the Stock Market Affect the Economy
• Impact of Trade War on Global Economy
• How Does War Affect the Economy Positively
• Economic Factors Affecting Business
• Political Factors Affecting Business
How Trade Sanctions Impact Crypto Markets
Why Sanctioned Nations & Individuals Use Crypto
Sanctions disrupt traditional banking and trading systems, forcing those under restrictions to seek alternatives. Crypto is decentralized and allows parties to bypass government control, making it an attractive option for those who need to make cross-border transactions.
Traditional Banking Is Cut Off
Sanctions often block access to international banking systems like SWIFT and cut off all traditional financial avenues. In 2022, when Western countries sanctioned Russian banks, they were removed from SWIFT, making it nearly impossible for Russians to conduct international transactions. Within days, many turned to crypto.
Crypto Is Decentralized
Unlike banks, Bitcoin and Ethereum transactions do not require government approval. This means sanctioned individuals can use crypto to move funds across borders without interference from global authorities or the threat of having assets seized.
Crypto Offers Financial Privacy
Some crypto platforms allow for semi-anonymous transactions, making it harder for governments to track payments. This is particularly important for users seeking to evade sanctions, as it helps them maintain privacy while conducting transactions.
Example: Russia’s Use of Crypto to Bypass SWIFT Sanctions (2022)
After Western sanctions removed Russian banks from SWIFT, Russian businesses and citizens turned to crypto for international transactions. Bitcoin trading volume spiked in Russia as people sought alternative ways to move money across borders. Tether (USDT) on Tron became preferred, as stablecoins allowed Russians to hold digital dollars without using banks.
Impact on Crypto Traders
USDT and BTC increased in Russia, causing temporary price fluctuations. Traders anticipating the surge in Russian crypto adoption profited from the BTC/USDT trading volume spike.
Stablecoins Become the Preferred Choice in Sanctioned Economies
Bitcoin is volatile, but stablecoins offer a more reliable digital form of USD for daily transactions. USDT (Tether) and USDC (USD Coin) are widely used in sanctioned countries, allowing people to store value in dollars digitally.
Example: Venezuela’s Crypto Boom Amid U.S. Sanctions (2019-2022)
The U.S. sanctioned Venezuela’s oil exports and froze government assets, leading to a shortage of USD in the country. Venezuelans turned to stablecoins (USDT) to protect their savings from hyperinflation and currency devaluation. Crypto adoption in Venezuela surged, with local businesses accepting USDT for payments instead of the Venezuelan bolívar (VES).
Impact on Crypto Traders
Increased USDT trading volume in Venezuela affected the stablecoin’s market dynamics. Traders who monitored Tether’s adoption in Latin America saw profitable arbitrage opportunities.
Governments Tighten Crypto Regulations to Prevent Sanctions Evasion
As crypto becomes a tool for bypassing sanctions, governments increase regulatory enforcement to track and block illicit transactions. U.S. regulators target crypto exchanges that facilitate sanctioned transactions.
Example: U.S. Treasury Blacklists Tornado Cash (2022)
Tornado Cash, an Ethereum-based privacy mixer, was sanctioned by the U.S. Treasury for allegedly helping North Korean hackers launder stolen funds. All wallets associated with Tornado Cash were blacklisted, making it illegal for U.S. citizens to use the service. Some Ethereum developers were arrested for contributing to Tornado Cash’s code, raising concerns about censorship in DeFi.
Impact on Crypto Traders
DeFi users lost access to Tornado Cash, and some wallets were banned from interacting with regulated exchanges like Coinbase. Ethereum’s price dipped after the Tornado Cash ban, as fear spread about DeFi regulation.
Centralized Exchanges Face Pressure to Comply with Sanctions
Major crypto exchanges must comply with government-imposed sanctions or face penalties. Some exchanges block transactions from sanctioned countries, while others operate in legal gray areas.
Example: Binance & Coinbase Restrict Russian Users (2022-2023)
After the U.S. and EU sanctioned Russian individuals, crypto exchanges were pressured to ban Russian accounts. Binance restricted Russian users from trading USDT and other stablecoins, complying with global sanctions. Some Russians moved to decentralized exchanges (DEXs) to continue trading, avoiding restrictions on CEXs.
Impact on Crypto Traders
Russian traders faced withdrawal limits, forcing them to seek alternative trading platforms. USDT demand rose in Russia, leading to minor depegging risks and temporary price discrepancies.
Why DeFi Is Attractive to Sanctioned Users
Decentralized finance (DeFi) offers fewer regulations and restrictions, making it an appealing option for users in sanctioned countries.
No KYC Requirements
Many DeFi platforms do not require users to verify their identity, which allows sanctioned individuals to use DeFi services without the government tracking their transactions.
Uncensorable Transactions
Smart contracts run automatically, making it difficult for governments to block transactions. This allows sanctioned users to swap crypto freely without interference from regulators.
Global Access
Anyone with an internet connection can use DeFi services without approval from banks or regulators. This is particularly valuable for users in sanctioned countries, as their access to traditional financial services is often cut off.
Example: Iran Uses DeFi to Access Financial Services (2021-2023)
Due to U.S. sanctions, Iranian businesses struggled to access international financial services. Some Iranian firms started using DeFi platforms like Uniswap and Curve Finance to swap stablecoins for transactions. Iran also encouraged Bitcoin mining to generate revenue outside of the traditional financial system.
Impact on Crypto Traders
DeFi platforms saw increased usage from sanctioned regions, boosting transaction volumes. Governments began investigating DeFi protocols more aggressively, leading to higher regulatory risks.
Tracking Crypto Regulations & Sanctions in Real Time
Traders should monitor government announcements on crypto-related sanctions to avoid exposure to restricted wallets or platforms.
Example
The U.S. Treasury’s sanctioning of Tornado Cash caused Ethereum users to scramble for alternative privacy solutions.
Using Both CeFi & DeFi for Trading Flexibility
Relying solely on centralized exchanges can be risky if sanctions force them to block accounts.
Example
Russian users who relied on Binance suddenly could not access their funds, while those using Uniswap continued trading freely.
Avoiding Blacklisted Wallets & Sanctioned Transactions
Wallet addresses tied to sanctioned entities can be blocked from using regulated crypto services.
Example
The U.S. blacklisted BTC wallets associated with Iranian ransomware operations, leading to frozen funds for some traders.
Using AI-Powered Tools to Track Crypto Sanctions & Market Movements
AI-based tracking platforms like GoMoon.ai help traders monitor crypto-related sanctions in real time.
Example
If GoMoon.ai assigns a high impact score to new crypto regulations, traders can preemptively adjust their holdings.
GoMoon Uses AI To Decode Economic Events For Smarter Trading
GoMoon transforms economic calendar data with AI-powered insights for smarter trading decisions. Our platform analyzes global events and rates their market impact on a scale of 1 to 10, helping you understand how they'll affect various assets. We've packed everything traders need: live economic event streaming, custom notifications, and historical event replay with TradingView charts. What sets us apart is our comprehensive approach to event analysis.
Whether you're tracking the impact of major economic announcements or comparing forecast data with actual outcomes, GoMoon provides straightforward, actionable insights. You can personalize your calendar, stream live meetings directly on the platform, and analyze historical events like the dot-com bubble or the COVID-19 crash to understand market reactions better. GoMoon clarifies the complex world of economic events for traders seeking data-driven decisions. Get started for free to get AI-powered economic insights today.
How Forex & Crypto Traders Can Navigate Trade Sanctions
1. Why Traders Must Monitor Sanctions in Real Time
Sanctions don’t come with warnings — they hit fast, and markets respond even quicker. A sudden ban, SWIFT restriction, or blacklist announcement can crash a national currency or send crypto volume surging in unexpected regions.
Forex Impact
In 2022, Russia’s ruble (RUB) collapsed by over 40% after the U.S. and EU rolled out financial sanctions. RUB/USD traders who stayed ahead of the news made profitable shorts.
Crypto Impact
In Venezuela, when access to USD was cut off, locals turned to stablecoins like USDT to survive. Prices of USDT on local exchanges surged due to panic buying.
Solution: GoMoon’s AI-powered economic event tracker includes real-time alerts for significant sanctions from sources like OFAC, the UN, and the EU. You get notified before the market reacts, giving you time to act.
2. Hedging Against Currency Devaluation
Sanctions usually trigger capital flight — investors pull money out, and currencies tank. Traders who understand this cycle can hedge early.
For Forex Traders
Short the sanctioned country’s currency (e.g., shorting RUB/USD or USD/TRY).
Use options or futures to protect long positions or speculate on volatility.
Favor safe-haven currencies like USD, CHF, or JPY.
Example: When Iran faced new sanctions, the Iranian rial (IRR) lost over 80% of its value. Traders positioned in USD/IRR saw significant gains.
For Crypto Traders
Shift holdings away from assets popular in sanctioned regions (e.g., TRON, USDT in Russia).
Diversify into DAI or BUSD as alternatives to avoid regulatory blowback.
Store funds in decentralized wallets or DEXs (Uniswap, Curve) if centralized exchanges get blocked.
Example: After Binance restricted Russian users, trading volume on Uniswap from Russian IPs spiked.
3. Diversify Your Strategy Across Regions & Platforms
Don’t put all your risk in one basket. Sanctions ripple out — if China gets sanctioned, it doesn’t just affect CNY, but also AUD, CAD, and even oil prices.
For Forex Traders
Limit exposure to any single at-risk currency.
Watch commodity currencies that rely on exports (e.g., NOK, AUD).
Use gold (XAU/USD) or USD as safe havens when news breaks.
Example: During the U.S.-Iran tensions, XAU/USD surged as traders fled riskier currencies.
For Crypto Traders
Hold assets on both CeFi (centralized exchanges) and DeFi (like Aave, Uniswap).
Spread assets across blockchains — Ethereum, BNB Chain, Polygon — in case a network faces pressure.
Keep backups of private keys and use non-custodial wallets.
4. Stay Legally Compliant (and Avoid Getting Frozen Out)
Using crypto to skirt sanctions can land traders in legal trouble. Even if you didn’t mean to, interacting with blacklisted wallets or platforms could result in blocked funds or frozen accounts.
How to Stay Safe
Regularly check OFAC, EU, and UN sanction lists.
Avoid trading with wallets flagged for sanctions or illicit activity.
Use GoMoon’s compliance alerts to get warnings about high-risk transactions and blacklisted wallets.
Be cautious with mixer protocols (like Tornado Cash) or privacy coins under scrutiny.
Example: After the U.S. sanctioned Tornado Cash, users who previously interacted with it were banned from major platforms — some lost access to their funds permanently.
5. Use AI to Track Sanctions Before Markets React
Sanctions are political, not always predictable — but the fallout is very real for traders. The best way to manage risk is to act before the crowd.
GoMoon’s AI scans government bulletins, regulatory bodies, and global news 24/7.
You’ll receive custom alerts when new sanctions are announced — and even a projected impact score for key currency pairs and crypto assets.
This lets you adjust positions, hedge exposure, or exit markets entirely before the headlines hit retail traders.
Use Our AI-powered Economic Calendar Tool for Free Today
Economic interdependence is a term used to describe the financial relationship between countries and how they affect each other’s economies via trade. As one country’s economy grows or shrinks, so does the other’s. Economic interdependence can create opportunities for governments, businesses, and investors. It can also lead to economic contagion, where one country’s financial issues spill over into other economies. The rise of globalization and free trade has increased economic interdependence around the world. As countries become more connected, they can better weather economic shocks and improve overall economic stability. GoMoon helps traders make sense of economic interdependence and how different countries’ economic health impacts various financial markets and instruments.
GoMoon Uses AI To Decode Economic Events For Smarter Trading
GoMoon transforms economic calendar data with AI-powered insights for smarter trading decisions. Our platform analyzes global events and rates their market impact on a scale of 1 to 10, helping you understand how they'll affect various assets. We've packed everything traders need: live economic event streaming, custom notifications, and historical event replay with TradingView charts. What sets us apart is our comprehensive approach to event analysis.
Whether you're tracking the impact of major economic announcements or comparing forecast data with actual outcomes, GoMoon provides straightforward, actionable insights. You can personalize your calendar, stream live meetings directly on the platform, and analyze historical events like the dot-com bubble or the COVID-19 crash to understand market reactions better. GoMoon clarifies the complex world of economic events for traders seeking data-driven decisions. Get started for free to get AI-powered economic insights today.
Related Reading
• How Does the Economy Affect a Firm’s Profit?
• Hedging Tools
• Macroeconomic Analysis
• How to Prepare for Economic Collapse
• How to Trade During a Recession
• How to Prepare for a Stock Market Crash
• How to Trade Volatility
• What Happens to the Stock Market During a Recession