Russia has begun using Bitcoin and other digital currencies for international trade as part of its efforts to counter the Western sanctions imposed on it since its invasion of Ukraine in February 2022, Reuters reported. The sanctions, which have restricted Russia's access to global financial systems, have caused the country to explore alternative payment systems, such as cryptocurrencies and local currencies, such as the Chinese yuan.

Russia introduced legislative changes to legalise the use of digital currencies and exempted crypto transactions from VAT while capping crypto taxes at 15% earlier this year. The country recently created legal frameworks for crypto miners and approved agencies to use cryptocurrencies for international payments. Russian Finance Minister Anton Siluanov stated on the Russia 24 television channel that domestically mined Bitcoin is now being used by Russian companies in foreign trade.

"As part of the experimental regime, it is possible to use bitcoins, which we had mined here in Russia (in foreign trade transactions). Such transactions are already occurring," Siluanov said, emphasising Russia's position as one of the leading miners of Bitcoin. "We believe they should be expanded and developed further. I am confident this will happen next year," he added.

The U.S. and EU sanctions have heavily effected Russian access to financial markets as the export of U.S. dollars and euros to Russia was banned after the country's aggression on Ukraine. Russia has been depending on the Chinese yuan for bilateral trade. However, according to The Kyiv Independent, approximately 80% of Russian payments in yuan were rejected or returned by mid-2024 due to expanded U.S. sanctions targeting companies transacting in local currencies with Russia. This forced Russia to look for alternate currencies for international trade.

Cryptocurrencies have emerged as a viable alternative for Russia, enabling the country to bypass traditional financial restrictions. In addition to digital currencies, Russia and China have reportedly discussed using barter systems to circumvent sanctions, according to Reuters.

A Growing Trend Among Nations

Russia is not alone in adopting cryptocurrencies for cross-border transactions. Countries such as El Salvador and the Central African Republic have recognised Bitcoin as legal tender, allowing its use in both domestic and international trade. This trend is expected to grow, as digital currencies are seen as beyond the regulation of any single entity. Their decentralised and secure nature is particularly attractive to regions seeking to circumvent financial limitations or modernise their economies.

Russian President Vladimir Putin, once sceptical of cryptocurrencies, declared earlier this month that Bitcoin is "unstoppable" and cannot be controlled by any authority in the world, emphasising it's growing acceptability.

The increasing use of digital currencies in global trade underscores their rising significance in the international economic landscape. For countries like Russia, cryptocurrencies represent a lifeline to combat trade and financial restrictions.