Russia has seemingly turned to cryptocurrency since the West decided to ‘punish’ the nation for its invasion of Ukraine. A list of sanctions had been imposed upon the country by the United States and the EU which worked to essentially cut Russia off from world traders. However, with the rise in popularity of crypto, it has provided a possible way for the country to evade these sanctions which would have otherwise stuck when fiat currencies were the only form of payment.
Why Russia Could Turn To Cryptocurrency
One thing that has drawn investors to cryptocurrencies such as Bitcoin is the fact that they are decentralized. A decentralized currency is not controlled by an entity. Hence, sanctions do not apply to them regardless of how severe they are. This has made it attractive to those who want to evade detection by governments, or in this case, countries trying to circumvent sanctions.
Lately, Russia has been warming up to crypto as a way to foster trade around the sanctions. The most prominent of these have been the sanctions on Russian gas purchases, which breeds the possibility of the country accepting crypto as a form of payment for their oil and gas. By using a cryptocurrency such as Bitcoin, Vladimir Putin could be able to completely evade these sanctions and the established banking system.
Back in September, the US Treasury’s assistant secretary for Terrorist Financing and Financial Crimes, Elizabeth Rosenberg, told lawmakers that it was possible for the Kremlin to actually evade sanctions levied against it. Senator Elizabeth Warren also echoed this concern, pointing to the fact that there was already widespread use by North Korea to evade sanctions, and it was just as easy for Russia to do the same.
Still An Important Player
Even though there are currently sanctions against Russia, the EU still relies heavily on the supply of oil and gas from the Kremlin. Companies in Europe, although they have shown support for Ukraine in the war, continue to quietly acquire products from Russia.
Given this, it is not a stretch to say that Russia would have an abundance of customers if it were to switch to crypto payments for its oil and gas. It is already an established player in the oil and gas industry and companies will not have an easy go of it having to change suppliers. So it would make sense to go through the relatively small inconvenience of converting fiat to crypto to pay Russia than spending millions of dollars to change international suppliers.
Russia is already softening its stance on cryptocurrencies since the war started. In September, it was reported that the government had reached an agreement with the central bank on a rule that would allow residents to carry out cross-border payments using crypto. Trade Minister Denis Manturov said back in May that the country would legalize digital asset payments “sooner or later.”
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