Russia is mining a hot cryptocurrency, trying to solve one big trade problem

• Russian firms are using crypto for international payments amid sanctions, said the country’s finance minister.
• Recent legislative changes have reversed Russia’s previous resistance to crypto.
• Global banks have reduced transactions with Russia, prompting a shift to alternative payment systems.

Russian companies have found another way to skirt Western sanctions against trade payments: cryptocurrency.

Some businesses have begun using crypto, including bitcoin, to make international payments, Anton Siluanov, Russia’s finance minister, told Russia 24 TV channel on Wednesday.

“As part of the experimental regime, it is possible to use bitcoins, which we had mined here in Russia,” Siluanov said, according to a Reuters translation.

“Such transactions are already occurring. We believe they should be expanded and developed further. I am confident this will happen next year,” he said.

This development follows legislative changes this year that allow crypto to be used in international payments. The country has also made it legal to mine crypto.

Bitcoin is having a banner year following Donald Trump’s victory in the US presidential election. The president-elect touted crypto on the campaign trail and nominated crypto-friendly Paul Atkins as chair of the Securities and Exchange Commission.

Bitcoin breached the key $100,000 threshold for the first time earliest this month and is now trading around $98,000.

Despite its increasing prominence, bitcoin is still largely considered a volatile and risky asset. At least two countries — El Salvador and the Central African Republic — have adopted bitcoin as legal tender.

Russia used to be resistant to crypto

Russia’s stance on crypto marks a shift for President Vladimir Putin’s administration.

In early 2022 — before the invasion of Ukraine — Russia’s central bank proposed a ban on the use and mining of cryptocurrencies within the country, citing risks to financial stability and monetary policy.

However, the heavily sanctioned country has been facing so many issues with international payments that it shifted its position, rushing to set up alternative payment systems, including crypto, to facilitate trade.

This development comes as Russia’s international trade is getting ever more difficult, with global banks from China to the United Arab Emirates, Turkey, and Austria reducing transactions — even in non-US dollars.

Russia’s $300 billion worth of foreign currency reserves are also still frozen. G7 countries are debating how to use it to support Ukraine. In October, the UK used profits from the frozen assets to offer Ukraine a $3 billion loan.

Putin himself has weighed in on crypto, saying bitcoin is a good alternative to foreign currency reserves.

“A legitimate question: why accumulate reserves if they can be lost so easily?” Putin said at an investing conference earlier this month.

In contrast, bitcoin could be a compelling alternative.

“Who can prohibit it? No one,” Putin said.