Russia is making significant strides in the world of cryptocurrency, with recent legislation allowing for the mining of digital currencies and using them for international transactions. According to a report from Chainalysis, the Central Bank of Russia is spearheading this effort, with plans for trial cross-border crypto transactions set to begin in September.
Russia’s crypto Strategy to Skirt Sanctions
President Vladimir Putin recently signed bills into law that legalized cryptocurrency mining and permitted international crypto payments. These new laws will enable approved Russian entities to utilize digital currencies for cross-border transactions. Additionally, Russia's central bank is currently testing its digital currency, the digital ruble, which is expected to launch in 2025.
Chainalysis notes that these legislative efforts are part of Russia's broader strategy to develop alternative payment methods to alleviate the pressure of Western sanctions while reducing dependency on the U.S. dollar. The use of digital currencies in international trade aligns with Russia's long-term goal, especially given the escalating geopolitical tensions in recent years.
The report also highlights Russia-based cryptocurrency exchanges like Garantex and Exved as potential platforms for processing international crypto payments. These exchanges have been associated with sanctions evasion tactics in the past. Additionally, non-KYC platforms such as Bitzlato, Suex, and Tetchange, all with offices in Moscow, may play a crucial role in Russia's crypto ecosystem due to their lack of identification requirements.
While platforms like Garantex offer deep liquidity across major blockchains, making them valuable for cross-border payments, Exved has close links to InDeFi Bank, which was founded by Garantex's Sergey Mendeleev and former KGB officer Alexander Lebedev. Together, they have been facilitating imports and exports using cryptocurrency.
Russia’s Broader Plans for crypto and International Trade
In addition to domestic efforts, Russia is collaborating with countries like Brazil, India, China, and South Africa within the BRICS community to explore utilizing blockchain technology for international payments. This partnership aims to establish alternatives to the traditional U.S. dollar-dominated financial system.
Another notable initiative is Russia's Financial Messaging System of the Central Bank (SPFS), designed as an alternative to the SWIFT financial messaging system. While SPFS has connected 52 Iranian banks and 106 Russian banks, its international adoption remains limited.
Despite previous opposition to cryptocurrencies and a push for a total ban in 2022, the Central Bank of Russia has since shifted its stance. While domestic crypto payments remain banned, the country's recent legislation signals a new direction toward embracing digital currencies for international trade.
