Russian oil companies are using Tether to convert Chinese yuan and Indian rupees to Russian roubles to make the transaction process smoother. This bypasses Western sanctions and establishes a more independent way to conduct cross-border transactions. Anton Siluanov, Finance Minister, said the changes started to take effect after the legal framework was amended in August 2024, allowing mining companies to transact with cryptocurrency. This was done to overcome trade disruptions caused by Western sanctions and the US war in Ukraine. A Chinese buyer, for example, pays a banker offshore in exchange for Russian oil. The banker then converts the money into crypto and sends it to Russia, where it is finally converted into roubles. An anonymous source for Reuters claims that transactions like this occur every month for tens of millions in dollars. The source claims to be familiar with the process and has seen it take place. Fiat currency, however, remains the main medium for Russian oil trade despite numerous sanctions from Western countries. Russia, meanwhile, has been using multiple methods to bias sanctions, including using other currencies, such as the United Arab Emirates dirham, to make large-scale cross-border payments. China has remained cautious of cryptocurrencies despite Russia using stablecoins for cross-border payments. In 2021, the country essentially banned digital assets from the mainland. However, Hong Kong has embraced the new technology and even become a global hub for digital asset innovation. Russia has embraced crypto cautiously. This week, it created an Experimental Legal Regime (ELR), allowing a limited group of wealthy investors to trade cryptocurrencies for three years. Crypto-based cross-border payments in Russia only constitute a small fraction of the $192 billion oil trade; however, this shows the practicable use of crypto in avoiding large-scale sanctions. Other countries like Iran and Venezuela, have also used similar strategies to avoid external sanctions. Bitcoin, and cryptocurrency in general, was designed from the start to resist censorship, and thus proved to be quite an effective technology in facilitating payments. The Ukraine conflict was a catalyst for this change in global payment processes, revealing a lack of consistency regarding sanctions and providing a new use case for the digital assets market. America will most likely monitor these blockchain transactions to see whether they continue to challenge traditional forms of finance and hegemony. Russia may emerge from this conflict as a major contributor to digital asset technology, inspiring other nations to use similar means and regaining economic stability in uncertain times. Regulatory barriers continue to block cryptocurrency despite a strong case for Blockchain technology and a noticeable weakness regarding traditional reserves as a method to enable cross-border trade in a safe, reliable, and timely manner. Russia has made efforts to adopt the BRICS payment system and has attempted to adopt the currencies of trading partners, but alas, it has continued to fall back on using dollars, euros, and the SWIFT standard for transactions. Trading partners, like China, are therefore exposed to the secondary effects of Western sanctions, limiting trade opportunities for the two countries. In August 2024, Russia expanded its mining regulation, requiring industrial miners to register with a government database, comply with consumption restrictions, and report ongoing operations. The regulation also included the use of Russian-mined cryptocurrency to facilitate foreign transactions, cross-border operations, and international settlements. One of BRICS’ strategies is for member states to build sovereign technological infrastructure so that they are less reliant on Western technology. BRICS stipulates that members should retain technology control to limit Western hegemony from dominating supply chains. Russia has started embracing sovereign technologies, such as Sberbank launching a digital assets project in 2022, forming part of a larger trade and global independence project. In December 2024, a Russian lawmaker suggested that Bitcoin, due to its decentralized design, should be used to reduce reliance on western international finance systems. He further indicated that a Bitcoin reserve should be created, despite the ongoing criticism of such a reserve. The recent mining legislation, which included a section on cryptocurrency, may be a vital step for Russia to adopt digital asset technology, and it may continue to develop over the coming months and years. After all, Bitcoin may be a useful transition technology, from the preferred American standards, to a new and developing BRICS way of handling transactions. The case for Bitcoin as a Russian reserve currency appeared good in December 2024, as the digital asset continued to see market highs exceeding $100,000. Many see the asset as a tool to provide an extra layer of economic resilience during uncertain times and under the constant threat of global sanctions. Russia may continue to invest in digital asset technology, and more so as Bitcoin adoption rises in popularity.
