Paying with crypto is the strategy that the Russian government, led by Vladimir Putin, would use to settle payments for military-related imports. In this regard, planning in the former Soviet Union first aims to form a select group that will explore the viability of this method without becoming yet another reason for international sanctions.
This “financial army” formed by Putin’s administration would conduct international trade transactions within the limits of an Experimental Legal Regime (ELR). Reports from that country indicate that this group will consist of importers handpicked by authorities and several banks.
Paying with crypto to evade obstacles
The reason that led the Russians to consider cryptocurrencies as a means of exchange for their commercial operations is the need to bypass restrictions in the international market. It’s no secret that military and civilian product importers are struggling to operate due to economic sanctions imposed on Putin and his government, preventing them from engaging in trade with other countries in this sector.
Since paying with crypto requires a certain level of knowledge and expertise, the Russians decided not to improvise when selecting members for this experimental group. The initial members include importers from the Chamber of Commerce and Industry, experts from the Association of Electronics Developers and Manufacturers, and some banking institutions.
Considering the military mindset with which they typically approach their actions from the land of the former tsars, the idea is to cover commercial, operational, and financial flanks with the best resources available within their borders. In other words, Putin’s bet on crypto assets as a payment instrument is serious, and he expects it to help him ride the wave of economic sanctions.
China as the perfect partner
The use of cryptocurrencies to settle obligations with other countries, including China, Russia’s main trading partner, has been the path adopted since the economic sanctions imposed by the United States disrupted traditional trade channels.
The clearest example of this strategy is the known movements of Russian metal-producing companies that, being unsanctioned, can operate freely. These companies use Tether in their transactions with Chinese counterparts. By introducing the Ethereum-linked stablecoin, they have managed to bypass the prohibition on using dollars and yuan for payments.
The legal framework for paying with crypto
Since September 1, Russia has a law that allows, for example, the use of Bitcoin for international trade payments. However, this is still a nascent situation, and the regulatory framework is being developed by the Central Bank and the Ministry of Finance of the vast country located in Eastern Europe.
Nevertheless, the strategy of paying with crypto may not help Moscow achieve its goal of evading sanctions. Blockchain technology experts doubt they can use cryptocurrencies for payments because blockchain transactions can be detected due to their traceability. Additionally, the possibility of harsher punishments from the West remains a looming threat.
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