Key Points

  • Russia has begun using Bitcoin for international trade to evade Western sanctions.

  • Despite facing challenges, the increased use of Bitcoin by countries like Russia may have a significant impact on the price of Bitcoin.

Over the past year, there has been a significant shift in the global dialogue surrounding Bitcoin [BTC]. Governments, politicians, and traditional financial institutions now favor cryptocurrencies. This shift in attitude has even led to a country like the US, which previously opposed cryptocurrencies, electing a president who supports them.

Countries like the UAE have accepted cryptocurrencies as a means of payment. But what about Russia? Despite certain regions banning cryptocurrency mining, Russia seems to be embracing the use of Bitcoin for certain economic activities.

The application of Bitcoin in foreign trade

Russian Finance Minister Anton Siluanov revealed that Russia has begun using Bitcoin and other cryptocurrencies for international trade. This move was taken following legislative reforms aimed at circumventing the severe sanctions imposed on the country by Western nations.

Earlier this year, Russia legalized the use of cryptocurrencies in international trade and officially established mining operations in the country. As one of the major Bitcoin miners, Russia views digital currency as a practical solution to its economic challenges.

Russia turns to Bitcoin to evade sanctions

Due to severe sanctions from Western countries, new legislation allowing Bitcoin for cross-border transactions has become a necessity for Russia. Siluanov confirmed that such transactions are taking place and are expected to expand further next year.

Since Russia's invasion of Ukraine in 2014, the country has faced massive sanctions. After the full-scale war against Ukraine in 2022, these economic restrictions intensified, making Russia the most sanctioned country in the world. Consequently, traditional financial institutions have avoided trading with Russia due to fears of sanctions from the US and other Western nations.

President Putin views Bitcoin as a way to evade these sanctions, as BTC is decentralized and not controlled by any single country. Putin believes that the US government wields the dollar as a weapon, thereby undermining its role as a reserve currency. He considers Bitcoin, which is not controlled by any single country, to be the perfect means to avoid sanctions.

Potential Challenges

While Putin's strategy indicates that sanctions against Russia are having an effect, integrating Bitcoin and other cryptocurrencies could help Russia evade these sanctions. However, it would be a challenge for cryptocurrencies to circumvent the US-dominated international financial system on a large scale.

The biggest obstacle to Russia's global trade is the current acceptance of Bitcoin by the government. Only five countries, including the UAE, Russia, Brazil, El Salvador, and the United States, have proposed incorporating Bitcoin into their systems. As a result, Russia and Putin may face significant challenges. Moreover, due to regulations, most cryptocurrency exchanges may avoid operations related to Russia.

Impact on Global Adoption of BTC

The increased use of Bitcoin by actors from countries like Russia may have a significant impact on the price of BTC. The price of cryptocurrencies typically rises with demand and purchasing pressure. Therefore, widespread usage may be beneficial for BTC and help drive its price up.