Russia Turns to Crypto for Oil Trade, Bypassing Western Sanctions

Reuters reported that Russia is increasingly using cryptocurrencies to facilitate oil trade with China and India, allowing it to sidestep Western sanctions. To facilitate these transactions, some Russian oil firms convert payments made in Chinese yuan and Indian rupees into rubles using Bitcoin, Ethereum, and stablecoins like USDT.

However, according to the International Energy Agency, these transactions still account for a small share of Russia’s $192 billion oil trade. While the country has explored various payment methods to circumvent sanctions, fiat currencies remain dominant, with alternatives like the UAE dirham also in use.

Despite this, crypto’s flexibility makes it an appealing option. Reuters noted that even if sanctions were lifted, Russia might continue using digital assets in the oil trade. Similarly, other sanctioned nations, such as Iran and Venezuela, have also turned to cryptocurrencies to maintain trade while reducing reliance on the U.S. dollar.

Russia’s Expanding Crypto Presence

The country has been cautiously increasing its involvement with cryptocurrencies. This week, the Bank of Russia introduced a proposal for a three-year experimental legal regime (ELR) that would allow a select group of investors to trade digital assets.

Under the proposal, only investors who meet specific criteria will be eligible to participate. Individuals must hold at least 100 million rubles ($11.5 million) in stock investments and deposits or have earned 50 million rubles in the previous year. Certain companies also qualify under existing laws.

Regulatory Stance on Crypto Payments

Despite these developments, Russia maintains strict regulations on cryptocurrency usage. While individuals are allowed to own digital assets, using them for everyday transactions remains illegal, and trading is heavily restricted.

The central bank has reaffirmed its position, stating that cryptocurrencies will not be recognized as a legal payment method. The proposed program will limit transactions to approved participants and impose penalties for violations.

At the same time, Russia is advancing its plans for a digital ruble, positioning it as a state-controlled alternative to private cryptocurrencies. The country’s major banks are expected to support its central bank digital currency (CBDC) for both retail and commercial transactions.