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Recent reports from Reuters indicate that Russia is increasingly utilizing cryptocurrencies like Bitcoin (BTC) in its oil trade with China and India as a means to circumvent Western sanctions.
Citing four sources with direct knowledge of the matter, the report suggests that Russia has begun integrating digital currencies into its energy transactions, marking a significant shift in its approach to international trade.
Russia’s Bitcoin And Crypto Transactions On The Rise
In August 2024, Russia enacted legislation to regulate Bitcoin mining, effectively ending years of uncertainty surrounding the industry. This regulatory development aligns with the country’s broader strategy to explore alternatives to the US dollar for settling international deals.
After initial resistance, the traditionally conservative Russian Central Bank has also softened its stance, recognizing the potential for cryptocurrencies to serve as a legitimate payment method.
This month, the Central Bank introduced an experimental legal framework allowing “highly qualified” investors to engage in Bitcoin trading. However, it stopped short of granting cryptocurrencies legal tender status.
According to the sources, unspecified Russian oil companies are also using Ethereum (ETH) along with Bitcoin and stablecoins like Tether (USDT) to facilitate the conversion of Chinese yuan and Indian rupees into Russian rubles.
While the volume of transactions conducted through cryptocurrencies remains small relative to Russia’s overall oil trade, it is reportedly on the rise.
Kremlin Intensifies Search For Payment Solutions
The use of cryptocurrencies to bypass traditional banking has been observed in other countries facing sanctions, such as Iran and Venezuela. One Russian trader’s cryptocurrency transactions with China could reach “tens of millions of dollars per month,” as per sources familiar with the trader’s operations.
The Kremlin’s search for alternative payment methods has intensified as US sanctions continue to impact trade. Following the withdrawal of Turkish and Chinese banks from Russia due to fears of secondary sanctions, the Russian economy has faced significant challenges. Last year, the Central Bank acknowledged that delays in sanctions-related payments had become a critical issue.
Compounding these challenges, US President Donald Trump recently allowed the expiration of the US Treasury Office of Foreign Assets Control (OFAC) General License 8L.
This license previously permitted foreign companies to process payments for Russian energy resources through sanctioned Russian banks, further complicating settlements in the energy sector.
Looking ahead, the demand for alternative payment methods, including cryptocurrencies, is likely to grow as Russia grapples with the ramifications of ongoing sanctions.
At last year’s BRICS summit in Kazan, President Vladimir Putin introduced the concept of a new digital currency, BRICS Pay, aimed at facilitating commodity trades among member nations. However, analysts suggest that the actual implementation of this cryptocurrency may still be several years away.
Featured image from DALL-E, chart from TradingView.com
