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Amid ongoing sanctions on the Ukraine war, Russia has turned to Bitcoin and other cryptocurrencies to promote its oil trade with major buyers China and India.
According to a Reuters report, Russian oil companies and businessmen are increasingly trading on bitcoin and cryptocurrencies, allowing them to circumvent restrictions in Western countries. Sources say the monthly trade volume has reached tens of millions of dollars.
The mechanism involves Chinese or Indian buyers buying oil and depositing RMB or rupee into offshore accounts owned by intermediary companies. The middleman then converts the fiat currency into cryptocurrency and transfers it to a Russian account and exchanges it for rubles.
While crypto-based oil payments remain a small part of Russia’s $192 billion oil trade, the practice has grown with sanctions bites. This trend underscores the practicality of Bitcoin and crypto in providing transactional solutions to approved countries. Iran and Venezuela have adopted similar encryption strategies. Resistance to censorship in Bitcoin and cryptocurrencies allows value transfer beyond the scope of sanctions.
In the second half of 2024, the Russian Minister of Finance used cryptocurrency in foreign trade was publicly recognized. The Kremlin sees bitcoin and cryptocurrencies as one of several effective strategies to overcome the economic penalties imposed on Ukrainian invasion. Russian banks also recently proposed legalizing cryptocurrency investments into wealthy citizens.
However, Russia’s oil trade still relies mainly on fiat currencies. President Donald Trump’s administration is debating whether to ease some restrictions to improve relations with Moscow.
As Ukraine’s conflict remains unresolved, Russia’s hub dedicated to leveraging Bitcoin and decentralized technologies appears to be aimed at reducing its reliance on traditional finance and dollar settlements. Other countries under U.S. sanctions may be closely monitored.