Key Points
- Russia has begun using Bitcoin for international trade to evade sanctions.
- This move could significantly impact Bitcoin’s global adoption and price.
The global perspective on Bitcoin [BTC] has seen a notable shift over the past year. The cryptocurrency has gained favor among governments, politicians, and conventional financial institutions worldwide.
Countries like the United States, previously opposed to crypto, have shown a change in stance, with the election of a pro-crypto president. The president is even backing a proposal to establish a strategic Bitcoin reserve.
Bitcoin’s Role in International Trade
Cryptocurrencies have become a recognized payment method in several countries, including the UAE. In Russia, despite a ban on crypto-mining in some areas, Bitcoin is being used for certain economic activities.
Russian Finance Minister Anton Siluanov has stated that Bitcoin and other cryptocurrencies are being utilized for international trade following legislative changes aimed at dodging severe sanctions imposed by western nations.
Russia legalized the use of cryptocurrencies in international trade earlier this year and formalized mining operations. As one of the leading Bitcoin miners, Russia views digital currencies as a viable solution to the country’s economic challenges.
Evading Sanctions with Bitcoin
The legislation permitting Bitcoin for cross-border transactions has become essential for Russia, given the heavy sanctions from Western countries. Siluanov confirms that such transactions are happening and anticipates further expansion and development next year.
Since invading Ukraine and annexing Crimea in 2014, Russia has been subjected to substantial sanctions. These restrictions intensified following the full-scale war on Ukraine in 2022, making Russia the most sanctioned country globally.
Traditional financial institutions have shied away from trading with Russia due to fear of sanctions from the U.S and other Western nations. Consequently, Russia has turned to Bitcoin, a decentralized currency not controlled by any single country, as a means to circumvent these sanctions.
President Putin has argued that the U.S. government has used the U.S Dollar to wage war, diminishing its role as the reserve currency. He is now in favor of Bitcoin, stating that it cannot be regulated and is an ideal way to avoid sanctions.
Feasibility of Putin’s Strategy
Putin’s strategy suggests that the sanctions imposed on Russia are impactful. However, integrating Bitcoin and other cryptocurrencies could enhance Russia’s ability to evade sanctions by bypassing U.S-led systems and participating in non-dollar-dominated markets.
Bitcoin could prove useful for small-scale transactions within the country and with friendly nations. However, using crypto on a large scale to bypass the U.S.-led international financial system could be challenging.
Only five countries have proposed incorporating Bitcoin into their systems, including UAE, Russia, Brazil, El Salvador, and the United States. Therefore, Russia and Putin could face significant hurdles. Additionally, most crypto exchanges are likely to refrain from conducting Russia-related operations due to regulations.
Impact on Global Adoption of BTC
The increase in Bitcoin usage by state actors like Russia could significantly influence BTC’s global adoption and price. The price of the cryptocurrency usually increases with demand and buying pressure. Hence, widespread usage could be beneficial for BTC and could potentially drive its price up.