In response to Western sanctions, Russia has started using cryptocurrencies for oil trading with China and India. This innovation opens up new horizons for international trade.
How Cryptocurrencies Support Oil Deals
Russia conducts oil deals through cryptocurrencies like Bitcoin, Ethereum, and Tether (USDT). These currencies allow bypassing traditional banking systems, enabling faster and more efficient transactions.
Buyers convert their local currencies, such as Chinese yuan or Indian rupees, into cryptocurrency, which is then used to pay Russian exporters. This creates a new route for international payments, avoiding restrictions related to the use of SWIFT.
Russia's Motivations for Using Cryptocurrencies
Following the imposition of Western sanctions, Russia sought ways to avoid restrictions associated with access to international finance. The use of cryptocurrencies allows the country to bypass traditionally controlled transactions, ensuring direct payments without intermediaries. This also aligns with Russia's ambition to enhance financial independence.
Cooperation with China and India in crypto trading can be seen as a strategic move to set new norms in international commerce.
Risks and Criticism of Crypto Oil Trade
The growing use of cryptocurrencies in international trade also entails several risks. Key concerns include the volatility of digital assets, which may pose financial risks for trading participants. Legal and regulatory challenges, as well as security issues, also need consideration. Furthermore, the use of cryptocurrencies may attract bad actors and exacerbate legality issues.
Cryptocurrencies are becoming an important tool for Russia amid international restrictions. Considering the risks and complexities, it is unclear whether this practice will be sustainable or remain a temporary solution.
