Exploring Bitcoin’s role in evading sanctions as Putin follows Trump’s lead – Will it work?

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  • Russia has started the use of Bitcoin for cross-border payments
  • Putin sees Bitcoin as the perfect tool to avoid sanctions since it cannot be controlled by countries

As a seasoned analyst with over two decades of experience in financial markets, I have witnessed the rise and fall of many currencies and assets. The recent move by Russia to adopt Bitcoin for cross-border payments is an intriguing development that warrants careful examination.

Over the last twelve months, the discourse about Bitcoin [BTC] has undergone a significant transformation globally. Now more than before, Bitcoin enjoys widespread approval from governments, political figures, and conventional financial bodies.

The sudden acceptance of cryptocurrencies has led nations like the United States, which were once against it, to elect a president who is pro-cryptocurrency. Notably, even President Trump shows a preference towards cryptocurrencies and backs a plan to create a strategic Bitcoin reserve.

Furthermore, it’s worth noting that cryptocurrencies are now recognized as a valid payment method in places like the United Arab Emirates. However, I’m curious to know more about the situation in Russia.

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Indeed, it appears that while Russia prohibits cryptocurrency mining in specific areas, they also seem to endorse the utilization of Bitcoin for certain economic transactions.

Bitcoin’s usage in foreign trade

As per the statements made by Russian Finance Minister Anton Siluanov, Russia is now engaging in international trade utilizing Bitcoin and other digital currencies. This shift comes as a result of legal adjustments aimed at circumventing stringent economic sanctions imposed by Western nations.

This year, Russia has made it lawful to employ cryptocurrencies in cross-border trading and has regulated Bitcoin mining within its borders. Given its status as a significant Bitcoin miner, Russia views digital currencies as a viable approach to addressing the economic issues it currently faces.

Russia adopts Bitcoin to evade sanctions

Due to strict sanctions imposed by Western nations, it’s essential for Russia to implement the fresh law enabling Bitcoin for international transfers. As stated by Siluanov, these transactions are already taking place, and he anticipates their growth and advancement in the upcoming year.

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Ever since Russia annexed Crimea from Ukraine in 2014, it has been subject to a multitude of economic sanctions. The intensity of these sanctions increased significantly following the large-scale conflict with Ukraine in 2022, making Russia currently the most heavily sanctioned nation globally.

As a result, many established financial institutions choose not to engage in trade with Russia due to concerns about potential sanctions imposed by the United States and other Western nations.

Therefore, since Bitcoin operates in a decentralized manner without being regulated by any specific nation, Putin’s Russia views it as a means to circumvent international sanctions.

As an analyst, I’d rephrase it like this: Following President Putin’s statements, he believes that the U.S. government has used the US Dollar as a tool in conflicts, thereby eroding its status as a reserve currency. This leads him to advocate for Bitcoin now, arguing that due to its decentralized nature, it cannot be regulated by any single entity. Given that Bitcoin operates independently of any nation-state, it presents an attractive option for circumventing sanctions.

Can Putin’s strategy work?

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Attempting to utilize cryptocurrency for cross-border transactions by Putin indicates that the sanctions enforced against Russia are having a positive impact and functioning as intended.

By integrating Bitcoin and other cryptocurrencies, Russia can enhance its capacity to bypass US-led sanctions by operating outside of US-dominated financial systems, particularly in markets where the US Dollar is not prevalent. This strategy aligns well with countries that do not adhere to US financial regulations.

Consequently, for handling minor financial exchanges domestically and with allied countries, Bitcoin might be suitable for Putin.

Although Bitcoin has potential to become a significant asset in the future, it’s difficult for cryptocurrencies to function efficiently on a broad scale without encountering obstacles when trying to circumvent the U.S.-dominated international financial system. Given the magnitude of Russia’s economy and the multiple nations required for trade with the country, it’s impractical to suddenly transition their top-10 economy to operate primarily on cryptocurrencies.

Additionally, a significant challenge in expanding Russia’s global trade lies in the acceptance of Bitcoin by governments worldwide. Notably, just five nations – UAE, Russia, Brazil, El Salvador, and the United States – have proposed incorporating Bitcoin into their systems.

Consequently, Russia and Putin are likely to encounter substantial difficulties ahead. In addition, the majority of crypto exchange platforms are expected to steer clear of transactions related to Russia due to regulatory concerns.

Any impact on global adoption of BTC?

It’s clear that as more countries like Russia begin to adopt Bitcoin for international trade, it could significantly influence Bitcoin’s market value.

Typically, a cryptocurrency’s value tends to increase due to increased demand and strong purchasing interest. Consequently, widespread adoption is positive news for Bitcoin, as it can contribute to its upward trend.

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2024-12-28 08:08