The biggest country in the world, Russia, traditionally discourages the use of cryptocurrency among its population. It has long deterred its citizens from participating in the cryptocurrency market as it was viewed as a way to undermine its nation’s financial system and stringent scrutiny in its economy. However, since the start of its invasion in Ukraine, which the country firmly labeled as just a “Special Military Operation,” new challenges and problems have arisen as it was coined to be the next “North Korea,” with its numerous sanctions imposed, inching it closer to be isolated from the rest of the world. In fact, it has already surpassed North Korea and Iran in terms of the total sanctions imposed by the global community.

Russia’s Tactic of Avoiding Sanctions

Since the start of its invasion of Ukraine in late February, experts and top Government officials in the West have warned that the Kremlin may take advantage of the lack of regulatory enforcement in the Cryptocurrency market to reduce the impact of the sanctions that countries may enforce on it. Moreover, multiple reports have found that the Kremlin has long planned the invasion and has since prepared for the possible sanctions it may face once its annexation of Ukraine commences, including using “alternative measures” to safeguard the Kremlin’s national interest.

One of these “alternative measures” under the Kremlin’s disposal is to utilize cryptocurrency to avoid sanctions. Multiple reports have painted pictures of how Russia uses cryptocurrency’s stablecoins (such as USDT and USDC) and other coins (such as Bitcoin and Ethereum) in its foreign transactions, dealings, and trade using multiple crypto wallets and addresses. However, the Kremlin does not acknowledge any involvement in these activities.

Using Cryptocurrency For its Debt Repayment

In a report, Ivan Chebeskov, Head of Russia’s finance ministry’s financial policy department, said that “The idea of using digital currencies in transactions for international settlements is being actively discussed.’ In addition to this, according to TASS, a Russian state news agency, the Russian Industry and Trade Minister, Denis Manturov, said in an interview that its Central Bank is actively looking into it, adding, “The question is when it will happen, how it will happen, and how it will be regulated.”

Russia has earlier indicated the idea of allowing cryptocurrency to be used as payment for its oil and gas sold to “friendly countries.” At the time, the head of the energy committee, Pavel Zavalny, expressed that China and Turkey could start paying for energy in Russian rubles, Chinese yuan, Turkish lira, or even Bitcoin.

Russia’s Future Use of Cryptocurrencies

Aside from evading sanctions and paying its foreign debts, the Kremlin could also utilize cryptocurrency as part of its central bank’s reserves to boost its currency’s backing and make it more resilient against foreign pressure and outside factors. It could also adopt a blockchain system in the country as a way to revitalize its numerous affected industries by decentralizing its stimulus or financial aid to make it more efficient and could reach its target beneficiaries sooner.

Lastly, it could exploit the lack of regulation and anonymity to launder foreign currencies. This could be done by exchanging the Russian Ruble for cryptocurrencies and exchanging it to foreign currencies to replenish its dwindling foreign currency reserves and import much-desired products to its country using a more tender and universally accepted foreign currency (such as the US dollar and Euro) for payment.