- Russia has started the use of Bitcoin for cross-border payments
- Putin sees Bitcoin as the perfect tool to avoid sanctions since it cannot be controlled by countries
Over the past year, the debate over Bitcoin [BTC] has shifted worldwide. More than ever, Bitcoin is at the end of strong favorability from governments, politicians, and traditional financial institutions.
This newfound favorability has left countries such as the United States, that have previous opposed crypto, to elect a pro-crypto president. In fact, such is President Trump’s favoritism for crypto, that he is also supporting a proposal to establish a strategic Bitcoin reserve.
Additionally, cryptocurrencies have also become an accepted mode of payments in countries such as UAE. What about Russia though?
Well, while Russia has banned crypto-mining in certain regions, it also seems to be supporting the use of Bitcoin for some economic activities.
Bitcoin’s usage in foreign trade
According to Russian Finance Minister Anton Siluanov, Russia has started using Bitcoin and other cryptocurrencies for international trade. This, after legislative changes designed to avoid heavy sanctions put on the economy by western countries.
Earlier this year, Russia legalized the use of cryptocurrencies in international trade and formalized mining operations in the country. As one of the major Bitcoin miners, Russia sees digital currencies as a practical solution to economic challenges facing the country.
Russia adopts Bitcoin to evade sanctions
The new legislation allowing the use of Bitcoin for cross-border transactions has become a necessity for Russia amidst heavy sanctions from Western countries. According to Siluanov, such transactions are occurring, and he expects them to be expanded and developed further next year.
Since 2014, when Russia invaded Ukraine and took Crimea, it has faced massive sanctions. These economic restrictions escalated after the full-scale war on Ukraine in 2022, making Russia the most sanctioned country in the world.
Therefore, traditional financial institutions have avoided trading with Russia fearing sanctions from the U.S and other Western countries.
Thus, Putin’s Russia has seen Bitcoin as a way to evade the sanctions since BTC is decentralized and not controlled by a single country.
According to President Putin, the U.S. government has used the U.S Dollar to wage war, diminishing its role as the reserve currency. Therefore, he is in favour of Bitcoin now, arguing that no one can regulate the cryptocurrency. Since Bitcoin is not controlled by any single state, it is the perfect means to avoid sanctions.
Can Putin’s strategy work?
Putin’s attempt to use crypto for cross-border payments suggests that sanctions imposed on Russia are effective and working.
However, Russia’s move to integrate Bitcoin and other cryptocurrencies will improve its ability to evade sanctions by avoiding U.S-led systems, while engaging in non-dollar-dominated markets. As such, the use of crypto will work well in markets where the U.S Dollar is not dominant and with countries that are non-compliant with the U.S. financial systems.
Therefore, in making small-scale transactions within the country and across friendly nations, Bitcoin could work for Putin.
While Bitcoin is well-positioned to become a major asset in the future, it would be challenging for crypto to work on a large scale and bypass the U.S.-led international financial system. Based on the size of the Russian economy and the different countries needed to trade with the country, it becomes problematic to flip a switch and run a top-10 economy based on crypto.
Moreover, he largest limitation for Russia’s global trade is the current state of acceptability of Bitcoin by governments. In fact, only 5 countries have fronted the idea of having Bitcoin as part of their system. These countries include UAE, Russia, Brazil, El Salvador, and the United States.
Therefore, Russia and Putin will face considerable challenges. Finally, most crypto exchanges will also avoid conducting Russia-related operations because of regulations.
Any impact on global adoption of BTC?
Undoubtedly, the hike in use of Bitcoin by state actors like Russia and other countries in trade will have a massive impact on BTC’s price.
Usually, the crypto’s price hikes on the back of demand and buying pressure. Therefore, widespread usage will be good news for BTC and will help drive it up.
