Russia Now Allows Crypto Payments in International Trade to Counter Sanctions

Russian lawmakers passed a bill on Tuesday allowing businesses to use cryptocurrencies in international trade to circumvent Western sanctions imposed after Russia's invasion of Ukraine. The law is expected to go into force in September, with Russian central bank Governor Elvira Nabiullina stating that the first cryptocurrency transactions will occur before the end of the year, as reported by Reuters.

Russia has encountered significant delays in international payments with major trading partners such as China, India, and the United Arab Emirates, as banks in these countries, under pressure from Western regulators, have become more cautious.

A Historic Decision in the Financial Sphere

"We are taking a historic decision in the financial sphere," said Anatoly Aksakov, the head of the Duma lower house of parliament. The new law mandates the central bank to create an "experimental" infrastructure for cryptocurrency payments, with details yet to be announced.

This legislation is part of a broader package that includes regulations on cryptocurrency mining and the circulation of other digital assets. However, it does not lift the existing ban on cryptocurrency payments within Russia.

Economic Impact and Challenges

The central bank noted that payment delays have become a significant challenge for the Russian economy, leading to an 8% decline in Russian imports in the second quarter of 2024. Despite efforts to switch to the currencies of its trade partners and develop an alternative payment system within the BRICS group of emerging economies, many transactions are still conducted in dollars and euros through the international SWIFT system. This exposes banks in countries trading with Russia to the risk of secondary sanctions, forcing them to tighten their compliance procedures.

"The risks of secondary sanctions have grown. They make payments for imports difficult, and that concerns a wide range of goods," Nabiullina emphasized, highlighting that payment delays have resulted in longer supply chains and rising costs.

El Salvador Proposes Settling Trade With Crypto

El Salvador has proposed settling trade with Russia using cryptocurrency, Alexander Ilyukhin, the First Secretary of the Russian Embassy in Nicaragua, has said

the Russian diplomat emphasizes that El Salvador’s government remains neutral and is also interested in establishing trade ties with Russia. “We have difficulties with calculations because the official currency in El Salvador is the US dollar. As an alternative, El Salvador offers to use cryptocurrency in trade operations,” Ilyukhin said.