Russia favors cryptocurrency for international payments to counter Western sanctions

Russia is turning to cryptocurrencies as a means to counter Western sanctions and overcome cross-border payment challenges. The central bank governor, Elvira Nabiullina, has encouraged businesses to explore the use of cryptocurrencies and digital assets for settling payments with international partners. The conflict between Russia and Ukraine, which escalated in February 2022, has led to Western sanctions being imposed on Russia. As a result, Russian businesses have faced difficulties in settling payments with international partners, especially in countries that have not imposed sanctions on Russia, such as India, China, United Arab Emirates, and Turkey. This situation has been exacerbated by economic sanctions on key financial institutions like the Moscow Stock Exchange and the SWIFT global payment system. To address these challenges, Nabiullina believes that the adoption of cryptocurrencies and digital assets can provide new opportunities for cross-border payments. Some Russian firms have already started using cryptocurrencies to settle deals with Chinese partners. Meanwhile, Russia is also in discussions with other BRICS countries, including Brazil, India, China, and South Africa, to develop a payment system that is independent of Western institutions. However, creating such a system is not without its challenges, and it may take time to successfully establish an alternative system due to interference from Western countries. In light of the sensitivity surrounding these discussions, some officials, like the head of VTB, Andrei Kostin, suggest that they be treated as “state secret.”