Vladimir Putin has pushed for an alternative system of payments, defying the US dollar as a global currency, at the BRICS summit in Kazan, because of the need of Russia to evade more than 16,500 sanctions imposed on it after its invasion of Ukraine. The Central Bank of Russia is contemplating on integrating cryptocurrencies into the payment system.
The sanctions imposed by the US on foreign banks working in the Russian Federation have undermined cross-border payments for national companies and enterprises. Having legalized mining of various cryptocurrencies and establishing a framework for digital tokens, the Kremlin is attempting to use cryptocurrency exchanges to overcome these restrictions to provide Russian businesses with an effective option to ensure the operation of international transactions.
The success of the decision made by Russia to turn to cryptocurrencies for conducting international trade will depend on the level of acceptance of the Russian strategy among India, Iran, and China. Sovereign nations regard cryptocurrencies as volatile assets, being dangerous for the existing financial system. For example, being the major trading ally of Russia, the PRC has established bans on cryptocurrencies. Moreover, having created the Financial Intelligence Unit, India imposed extremely high taxes on cryptocurrency transactions in comparison to gold or equity.
Notwithstanding these circumstances, the Central Bank of Russia is allowed to use cryptocurrencies for settlements regarding foreign trade. It may also create a platform for digital currency on the basis of the National Payment System, create its rules, and establish specific requirements in accordance with the Experimental Legal Regimes. That is why the EU and the US have to take decisive measures to prevent Russia from using cryptocurrencies for the purpose of obtaining revenues from exports of various commodities and services to continue waging a war against Ukraine.
