In recent developments, Russia has increasingly turned to cryptocurrencies as a means to facilitate its oil trade with China and India, effectively circumventing Western sanctions that affect its substantial $192 billion oil trade. This shift was reported by Reuters, citing sources familiar with the matter.
Russia’s foray into the cryptocurrency space has been gradual, with notable steps taken this week when the Bank of Russia submitted proposals to establish an experimental legal regime (ELR) that would last for three years, allowing a “limited group of Russian investors” to engage in cryptocurrency trading.
Some Russian oil companies are reportedly utilizing cryptocurrencies such as bitcoin, ether, and stablecoins like Tether (USDT) to convert payments made in Chinese yuan and Indian rupees into roubles, according to the Reuters report. While these transactions currently account for only a small portion of Russia’s oil trade, they indicate a significant pivot towards digital financial solutions.
Other sanctioned nations, such as Iran and Venezuela, have also embraced cryptocurrencies as a means to maintain trade relations while reducing their dependence on the U.S. dollar, the dominant currency in global oil markets.
To navigate the landscape of international sanctions, Russia has developed various payment systems, with cryptocurrency being one of the tools at its disposal. However, traditional fiat currencies still play a predominant role in Russia’s oil transactions, alongside other alternative currencies such as the United Arab Emirates dirham, as noted by Reuters.
Interestingly, even in the event that sanctions were alleviated, Russia is likely to continue utilizing cryptocurrencies in its oil trading due to the flexibility and convenience they offer. Concurrently, the country is also advancing plans for its largest banks to support a digital ruble for broader retail and commercial applications.
The Bank of Russia has previously indicated that a ruble-backed central bank digital currency could serve as a tool to combat sanctions, a sentiment reiterated in discussions since 2021.
For further reading on the growing tendencies of U.S.-sanctioned countries leaning into cryptocurrencies, refer to our article on U.S.-Sanctioned Countries Such as Iran Leaning Heavily Into Crypto.
