Russia has begun utilizing cryptocurrencies for oil trades with China and India as it attempts to circumvent Western sanctions, according to reports from sources familiar with the developments.
The information reveals that some Russian oil companies have conducted transactions using Bitcoin, Ethereum, and stablecoins such as Tether’s USDT. This approach facilitates the conversion of Chinese Yuan and Indian Rupees into Russian Rubles, allowing for more efficient transactions despite financial limitations.
In typical transactions, a Chinese buyer deposits Yuan into an offshore account managed by an intermediary. The funds are subsequently converted into cryptocurrency and transferred through various accounts before reaching a final destination in Russia, where they are converted into Rubles.
These operations are reportedly valued in the tens of millions of dollars each month.
While the use of cryptocurrencies in Russia’s oil trading remains relatively limited, it is indicative of a larger trend. In the past year, the country has implemented new regulations surrounding crypto mining, taxation, and international trade.
The Western sanctions resulting from Russia’s military actions in Ukraine have spurred this move toward digital assets. Nevertheless, industry insiders suggest that oil companies may persist in utilizing cryptocurrencies even if the sanctions are lifted, given their efficiency and speed of transactions.
Challenges for Digital Ruble
As Russia increases its dependence on crypto for trade, its Central Bank Digital Currency (CBDC) initiative faces major challenges.
Recently, the Central Bank’s Governor announced an indefinite postponement of the digital ruble’s launch, citing the need for further adjustments to ensure the currency serves all stakeholders effectively.
Additionally, a recent survey suggests that the delay stems from the insufficient IT infrastructure of banks expected to manage the project.
The survey of Russian banking specialists indicated that 30% of financial institutions are not yet prepared to support the digital ruble. Experts noted that launching the CBDC necessitates upgrades to banks’ IT systems to accommodate higher transaction volumes.
Meanwhile, 20% of IT professionals in banking expressed that their systems are fully ready for the digital ruble, while another 50% reported being partially equipped but in need of further enhancements.
Simultaneously, around 14% of respondents voiced concerns regarding potential information security risks associated with the currency.
Given these obstacles, Russia’s national digital asset initiative may encounter further difficulties unless major financial institutions adequately prepare for its launch.
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