The Russian government has always been against bitcoin and has banned its use for domestic payments. However, they have lately started to see how virtual currencies could help people avoid U.S. and Western sanctions.
Anton Siluanov, the Russian Finance Minister, talked on Russian TV on Wednesday about whether bitcoin BTCUSD -2.97% and other digital assets can be used to avoid U.S. restrictions on international transfers.
Those ways “need to be developed and expanded,” and he said that they would be “next year.”
A lot of people in Washington, D.C., think that cryptocurrencies are dangerous to the country’s security and make it harder for police to stop money laundering and other illegal activities. The comments will only add to their beliefs.
While Russia is trying out crypto cross-border payments, experts say that this is more of a sign of how well sanctions are working on the traditional dollar-based currency system and that cryptocurrencies can’t be used on a big scale to get around the U.S.-led international financial system.
The fact that Russia has been forced to use less-than-ideal payment methods like bitcoin, barter, gold GC00 +0.68%, and less-liquid currencies is a great sign that the sanctions against Russia’s banks are working, wrote monetary economist John Paul Koning on X Wednesday.
A lot of people in the Biden administration, who don’t have a good reputation for being friendly to the crypto business, have said that using digital assets for illegal cross-border payments isn’t a big deal.
According to an address in 2022, Alessio Evangelista of the Treasury’s Financial Crimes Enforcement Network said that the administration “acknowledged that large-scale sanctions evasion using cryptocurrency by a state actor like Russia is not practicable.” He also said, “you can’t flip a switch and run a G20 economy on cryptocurrency.”
The Trump administration is likely to be much more supportive of crypto, but some new officials have said they don’t think bitcoin or other digital assets can be used to attack U.S. power.
The businessman from Silicon Valley named David Sacks will be Trump’s “crypto czar,” but he doesn’t think sanctions will work at all.
In March, he said that the idea that financial sanctions against Russia “are working is delusional.” He also said that regular people are the ones who suffer from these restrictions, like Europeans who have to pay more for energy because of trade restrictions.
In the past few months, President Vladimir Putin’s government has started to change its anti-crypto stance by allowing crypto mining and use in foreign payments.
Reuters says that earlier this month, Putin spoke positively about bitcoin as an alternative to the U.S. dollar for countries like Russia that are facing harsh financial penalties from the U.S. and its allies.
“Why keep dollars in reserves if they are so easy to lose?” Russia’s Putin asked. “Take bitcoin as an example. No one can stop it,” Putin said.
Still, experts aren’t sure that cryptocurrencies are big or liquid enough to really be a threat to the U.S. dollar.
Bitcoin’s market value has more than doubled in the past year, reaching almost $1.9 trillion. However, that amount is still small compared to the value of accepted, government-backed money that is used all over the world.
Analysts at the blockchain intelligence company Chainalysis wrote in September that Russia’s move to add cryptocurrency to its financial system could make it easier for it to avoid the U.S.-led financial system and do business in currencies other than dollars.
“On the other hand, large-scale on-chain sanctions evasion is still very unlikely, as Russia’s total foreign exchange reserves are still frozen at just under $500 billion in dollars, euros, and British pounds,” they said. “The crypto markets we have now just don’t have enough liquidity to handle such large transactions.”
