Russia is constantly looking for ways to circumvent Western sanctions imposed on it because of the war against Ukraine. A large part of the foreign trade of the country, which is almost completely cut off from the global financial system, is now carried out in rubles or in so-called “friendly” currencies - mainly yuan and rupees. In recent years, the dollar and the euro in Russia have been branded “toxic”. But there are also many difficulties with accounts in “friendly” currencies. That is why players often resort to cryptocurrencies. Here's how it works.
How Russian business uses cryptocurrencies in foreign trade
Russian companies are increasingly using cryptocurrencies to circumvent restrictions on foreign trade. So far, their share in the total volume of international payments is not large, but in some cases they have already become an important tool for overcoming international sanctions.
For example, according to Reuters, cryptocurrencies are used by oil companies - for the operational conversion of the limitedly convertible rupees and yuan into rubles. For this purpose, the services of intermediaries are used. According to one of the agency's sources, such operations are carried out relatively regularly in trade with China. We are talking about tens of millions of dollars per month.
Cryptocurrencies are also used by at least two large metallurgical companies, "Bloomberg" has learned from high-ranking officials of the companies in question. Interestingly, these companies have not been sanctioned, but for them, cryptocurrency payments are a backup channel that is used when regular transactions do not go through.
The bank “Rosselkhozbank” recently openly announced its intention to use cryptocurrencies. In the spring of 2024, while the US was actively negotiating with Russia, the Kremlin demanded the lifting of sanctions on the bank. However, this idea did not go anywhere, which is why the search for alternative payment methods, including cryptocurrencies, remains relevant for the bank.
The legal status of cryptocurrencies in Russia
The use of cryptocurrencies by businesses is one of the examples of how an alternative legal space is being formed in Russia in the conditions of war and sanctions. In it, with the tacit approval of the authorities, laws are either not observed at all, or the attitude towards them is flexible - depending on current political and economic interests.
“It is obvious that the transition to the use of digital payments is part of a broader strategy to move away from technologies and financial systems controlled by the West,” says financial expert Bob Savich of the Institute for Global Policy. “But the question is how successfully the Russian authorities will be able to use them for international payments.”
The Central Bank, whose powers include regulation of the financial market, has long been against the legalization of cryptocurrencies. It was only at the end of last year that Russian companies were officially allowed to use cryptocurrencies in foreign trade - but only under an experimental legal regime overseen by the regulator.
„As long as there are no rules, those who operate in the gray area and agencies that confiscate cryptocurrencies without reporting are the winners. "The losers are businesses and citizens who are waiting for clarity," commented digital currency expert Ani Aslanyan.
How sanctions are hitting Russia's cryptocurrency infrastructure
The new, 18th package of sanctions against Russia includes a ban on transactions by financial and credit institutions and crypto-asset service providers from third countries that, through their actions, thwart EU sanctions or support Russia's aggressive war against Ukraine.
In the spring, the US and Germany managed to block the Russian crypto exchange Garantex and freeze assets worth over 26 million euros - for circumventing sanctions and money laundering. According to their data, Garantex was also linked to the Hydra drug exchange.
An investigation by the “Financial Times” showed that almost simultaneously, Garantex was reborn in Kyrgyzstan under the name Grinex and with a new jurisdiction. At the end of February, the stablecoin A7A5, tied to the Russian ruble, appeared on Grinex - the first of its kind.
The owners of the A7 company, which launched this stablecoin, are the Moldovan businessman Ilan Shor (who lives in Russia since he was exposed in his homeland in a theft of one billion dollars) and the PSB bank, which serves the Russian military-industrial complex.
In the four months of A7A5's existence, transactions amounting to 9.3 billion dollars have passed through it, as is also clear from the research of the “Financial Times”. According to the representative of A7 Nikolai Shumakov, whom the journalists contacted, operations with the stablecoin are carried out mainly by Russian importers.
Author: Oleg Loginov