Russia Adopts Cryptocurrency for Global Trade to Sidestep Sanctions

On July 30, Russian lawmakers approved a bill allowing the use of cryptocurrencies in international trade. This legislative move, aimed at circumventing Western sanctions, marks a significant shift in Russia's financial strategy.

Central Bank Support

Russian Central Bank Governor Elvira Nabiullina has expressed support for the new law. She announced that the first crypto transactions are expected before the end of the year, highlighting a significant change in the country's approach to digital currencies.

Impact on Trade

Since Russia's invasion of Ukraine, the country has faced challenges with international payments, particularly with trading partners like China, India, and the UAE. These difficulties arise from banks' increased caution under Western regulatory pressure, leading to delays and higher costs.

Regulatory Framework

The new law mandates the creation of an "experimental" infrastructure for crypto payments. While details are still forthcoming, the legislation is part of a broader regulatory package covering cryptocurrency mining and the circulation of digital assets. However, the ban on domestic cryptocurrency payments remains in place.

Secondary Sanctions Concerns

Governor Nabiullina pointed out the growing risks of secondary sanctions, complicating payments for a wide range of goods. This has resulted in longer supply chains and rising costs, affecting the Russian economy.

Expert Insight

Mati Greenspan, CEO of Quantum Economics, commented that the adoption of cryptocurrencies is a logical step for Russia, as Bitcoin transactions cannot be censored or blocked. This move contrasts with the country's previous stance on digital currencies, reflecting a shift due to evolving circumstances.

Legislative background

The legislation follows increased sanctions from the U.S., EU, and Britain in response to Russia's actions in Ukraine. These measures target various sectors, including President Putin, the financial sector, and oligarchs, aiming to exert economic pressure.