- Russia has started using Bitcoin for cross-border payments
- Putin sees Bitcoin as the perfect tool to avoid sanctions because it cannot be controlled by countries
Over the past year, the discussion about Bitcoin raged [BTC] has shifted worldwide. More than ever, Bitcoin finds itself at the end of strong favor from governments, politicians and traditional financial institutions.
This newfound favor has prompted countries like the United States, which have previously opposed crypto, to elect a pro-crypto president. In fact, President Trump’s preference for cryptocurrencies is so great that he is also backing a proposal to establish a strategic Bitcoin reserve.
Moreover, cryptocurrencies have also become an accepted payment method in countries like the UAE. However, what about Russia?
Although Russia has banned crypto mining in certain regions, it also appears to support the use of Bitcoin for certain economic activities.
The use of Bitcoin in foreign trade
Russia has started using Bitcoin and other cryptocurrencies for international trade, according to Russian Finance Minister Anton Siluanov. This, after legislative changes intended to avoid heavy sanctions by Western countries on the economy.
Earlier this year, Russia legalized the use of cryptocurrencies in international trade and formalized mining operations in the country. As one of the largest Bitcoin miners, Russia sees digital currency as a practical solution to the economic challenges the country faces.
Russia Adopts Bitcoin to Avoid Sanctions
The new legislation allowing the use of Bitcoin for cross-border transactions has become a necessity for Russia amid heavy sanctions from Western countries. According to Siluanov, such transactions are taking place and he expects them to be expanded and developed next year.
Since Russia invaded Ukraine and seized Crimea in 2014, the country has faced massive sanctions. These economic restrictions escalated after the all-out war against Ukraine in 2022, making Russia the most sanctioned country in the world.
Therefore, traditional financial institutions have avoided trading with Russia for fear of sanctions from the US and other Western countries.
So Putin’s Russia has seen Bitcoin as a way to get around sanctions, as BTC is decentralized and not controlled by a single country.
According to President Putin, the US government has used the US dollar to wage war, reducing its role as a reserve currency. That’s why he now favors Bitcoin, arguing that no one can regulate the cryptocurrency. Because Bitcoin is not controlled by a single state, it is the perfect tool to avoid sanctions.
Can Putin’s strategy work?
Putin’s attempt to use crypto for cross-border payments suggests that the 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 US-led systems while engaging in non-dollar-dominated markets. As such, using crypto will work well in markets where the US dollar is not dominant and in countries that do not conform to US financial systems.
Therefore, Bitcoin could work for Putin in conducting small-scale transactions within the country and between friendly countries.
While Bitcoin is well positioned to become a major asset in the future, it would be challenging for crypto to operate at scale and bypass the US-led international financial system. Based on the size of the Russian economy and the several countries required to trade with the country, it becomes problematic to flip a switch and run a top-10 economy based on crypto.
Moreover, the biggest constraint on Russia’s global trade is the current state of Bitcoin’s acceptability by governments. In fact, only five countries have floated the idea of having Bitcoin as part of their system. These countries include the UAE, Russia, Brazil, El Salvador and the United States.
Therefore, Russia and Putin will face significant challenges. Finally, most crypto exchanges will also avoid Russia-related operations due to regulations.
Any impact on global BTC adoption?
Undoubtedly, the increase in the use of Bitcoin by state actors such as Russia and other trading countries will have a huge impact on the price of BTC.
Usually, the price of cryptocurrencies rises due to demand and buying pressure. Therefore, widespread use will be good news for BTC and help fuel its growth.
