Key Points
- Russia has begun using Bitcoin for international trade to evade western sanctions.
- Despite challenges, increased use of Bitcoin by countries like Russia could significantly impact Bitcoin’s price.
The global conversation around Bitcoin [BTC] has seen a significant shift in the past year. Governments, politicians, and traditional financial institutions are now more favorable towards the cryptocurrency. This change in attitude has even led to countries like the United States, which previously opposed crypto, electing a pro-crypto president.
Countries like the UAE have accepted cryptocurrencies as a form of payment. But what about Russia? Despite banning crypto-mining in some regions, Russia seems to be embracing the use of Bitcoin for certain economic activities.
Bitcoin in Foreign Trade
Russian Finance Minister Anton Siluanov revealed that Russia has begun using Bitcoin and other cryptocurrencies for international trade. This move comes after legislative changes aimed at circumventing heavy sanctions imposed on the country by western nations.
Earlier this year, Russia legalized the use of cryptocurrencies in international trade and formalized mining operations within the country. As one of the major Bitcoin miners, Russia views digital currencies as a practical solution to its economic challenges.
Russia Turns to Bitcoin to Evade Sanctions
The new legislation allowing Bitcoin for cross-border transactions has become a necessity for Russia due to heavy sanctions from Western countries. Siluanov confirmed that such transactions are happening and expects them to expand further next year.
Since 2014, when Russia invaded Ukraine, the country has faced massive sanctions. These economic restrictions intensified after the full-scale war on Ukraine in 2022, making Russia the most sanctioned country in the world. As a result, traditional financial institutions have avoided trading with Russia for fear of sanctions from the U.S and other Western countries.
President Putin views Bitcoin as a way to evade these sanctions since BTC is decentralized and not controlled by a single country. Putin argues that the U.S. government has used the U.S Dollar to wage war, thereby diminishing its role as the reserve currency. He believes that Bitcoin, not controlled by any single state, is the perfect means to avoid sanctions.
Potential Challenges
While Putin’s strategy suggests that sanctions on Russia are working, integrating Bitcoin and other cryptocurrencies could help Russia evade these sanctions. However, it would be challenging for crypto to bypass the U.S.-led international financial system on a large scale.
The biggest obstacle for Russia’s global trade is the current state of Bitcoin acceptance by governments. Only five countries, including the UAE, Russia, Brazil, El Salvador, and the United States, have proposed having Bitcoin as part of their system. As a result, Russia and Putin may face significant challenges. Furthermore, most crypto exchanges will likely avoid conducting Russia-related operations due to regulations.
Impact on Global Adoption of BTC
The increased use of Bitcoin by state actors like Russia could have a significant impact on BTC’s price. The price of the cryptocurrency typically increases with demand and buying pressure. Therefore, widespread usage could be beneficial for BTC and help drive its price up.
