Cryptocurrency is once again dominating the conversation about a global issue relating to the frosty relationship between Russia and the West. After the Russia-Ukraine war broke out in 2022, the United States of America and the European Union sanctioned the Kremlin for its perceived “aggression” in the conflict.
Then, the heavy sanctions were slammed on Russia with the aim of forcing the country into a negotiation. However, despite the international sanctions Vladimir Putin has managed to keep the Russian economy running.
More than three years into the war and many months with the sanctions, Russia still manages to carry out oil trades with countries like Iran and China. Reportedly, the Kremlin used proceeds from the oil trades to fund the war.
Meanwhile, recent reports are indicating that Russia leveraged cryptocurrency to circumvent the embargoes. This article will dissect the role of cryptocurrency in the running of the Russian economy and the country’s trade with its counterparts despite the sanctions.
Evolving Crypto Regulatory Regime in Russia
Since the start of the war, Russia has taken a different approach to regulating its cryptocurrency landscape. Before the conflict, the Kremlin passed a law that prohibited the local usage of digital assets among citizens.
Despite the ban, the use of cryptocurrencies for domestic payment within Russia is on the rise, suggesting the heavy interaction of its citizens with the industry. To tackle the financial crisis that came with the bans, Russia enacted a legislation that approved crypto mining in the country.
Additionally, Putin also signed a bill that allows Russia to use cryptocurrencies in international trade, a move that saw the Kremlin replace the US dollar with digital assets while transacting with foreign partners. However, the Russian president made a recent statement that supported the pointers that the country is repenting from the ban.
In a disclosure, Putin rhetorically asked if anyone could ban Bitcoin. He also discussed how emerging electronic systems are immune to sanctions owing to how they are emerging technologies.
The disclosure of the Russian president triggered a massive rally in the cryptocurrency market that day as Bitcoin surpassed its mythical $100,000 price mark. Putin urged Russia to avoid missing out on crypto, highlighting its growing relevance in the global payment system.
Likewise, a report by the Central Bank of Russia (CBR) confirmed that the country is set to kickstart a 3 years pilot program on the use of cryptocurrency for local transactions. Notably, the statement indicated how Russia is relaxing its domestic ban on crypto by allowing individuals with a massive net worth to buy and sell cryptocurrencies.
Is Russia Using Crypto To Evade Sanctions?
To a noticeable extent, Russia has leaned heavily towards crypto since the West bombarded it with trade and economic sanctions. In 2023, a report surfaced indicating that the Kremlin permitted Rosbank, a key financial institution in the Russian Federation to offer cross-border crypto payment services.
The development paved the way for other banks within the country to provide similar services. More so, reports indicated that the CBR is championing the quest to incorporate crypto into the country’s financial platform for international trade.
There are no doubts that indeed the relaxed approach of the Russian Federation toward crypto is part of its efforts to reduce reliance on the dollar. Furthermore, the CBR is increasing the pace of the development of its digital ruble project which will also help in circumventing the sanctions.
Similarly, Russia is also exploring the option to build a blockchain-centric payment system for foreign trades alongside other members of the BRICS. Considering how the Kremlin took a sharp reverse on its hostility towards crypto to facilitate international transactions, it is safe to say digital currencies have helped Russia evade sanctions.
Parting Words
While Russia has managed to fare well despite the enormous bans, the role of cryptocurrency in helping the federation manage its economy cannot be overemphasized. The crypto regulatory timeline in the country since the beginning of the political instability has improved from hostile to encouraging.
Still, the sudden embracement of crypto by Russia underlines how the sanctions had a severe impact on its economy, compelling the country to reconsider an innovation it once frowned at. However, there are reservations that cryptocurrency could actually help evade large-scale sanctions.
The transparency of the blockchain technology and limited liquidity made it difficult for Russia to trade smoothly outside the reach of the West and its sanctions. Despite its relaxed approach and inclusion of digital assets in foreign trades, cryptocurrency only played a minor role.
Read More :