it’s official Russia is using Bitcoin for international trade what started as dollarization has quickly spiraled into Russia’s own escape from the global theat Ponzi President Putin is now convinced that Bitcoin is Unstoppable and his Finance Minister says that the Russian government is ready to ramp up its use for trade in 2025 love it or hate it this is the kind of story bitcoiners used to dream about now it’s real really happening and you need to know about it it’s really happening my name is guy and stay tuned to find out how and why Russia has turned to bitcoin how Ukraine and the US might react and what it all means for the world slowly and then all at once this is the trajectory we’re seeing from governments adopting Bitcoin first it was eccentric El Salvador then Bhutan stepped into the ring and now the whole world is a buzz with the idea of a strategic Bitcoin Reserve Donald Trump’s election victory has forced politicians around the world to take seriously the notion that nation states perhaps even their own need to accumulate Bitcoin the BTC Reserve proposed by US senator Cynthia lumus is likely only a taste of what is to come over the next four years when lamus introduced her draft BTC Reserve Bill last summer it seemed like a cute idea but a fanciful one because you know that would never really happen would it but then the US election results sent BTC skyrocketing towards $100,000 and a raft of similar proposals started appearing in legislatures around the world in late November a Brazilian lawmaker introduced a similar Bill to the National Congress in December a member of Hong Kong’s legislative Council suggested that Hong Kong also accumulate BTC as a reserve asset the former Finance minister of Germany and fdp party leader Christian Lindner called for BTC to be added not only to the reserves of Germany’s Central Bank but also to those of the European Central Bank in Poland presidential candidate faav Menon tweeted his support for a national BTC Reserve adding quote BTC to the Moon fun fact when he was running for mayor of a Polish City in 2018 menson proposed using public school facilities to mine BTC well you got to start them I suppose then there’s Japan where opposition party politician Satoshi yes really Hamada suggested quote Japan should follow the example of the United States and consider turning some of its foreign exchange reserves into crypto assets such as Bitcoin Hamada asked the government to reveal its position on this and the prime minister’s office responded that it didn’t know enough to give a definitive answer so that’s a no for now but the government didn’t outright reject the idea either at the rate we’re going the list of governments contemplating hodling BTC will probably be longer by the time you’re watching this it’s an exciting time but behind all the buzz about BTC becoming a reserve asset there’s another story about State crypto adoption that deserves our attention Russia recently joined the list of governments to say not right now thanks to the idea of a national BTC Reserve however the very same government has also recognized crypto as a solution to one of its biggest problems namely sanctions Russia has been subject to sanctions by Western Powers since it annexed Crimea in 2014 as we all know these were cranked up to 11 after Russia invaded Ukraine in February 2022 within a month of the invasion sanctions had Frozen a trillion dollars in Russian assets but this was only the beginning as the war approaches its fourth year the European I alone is on its 15th round of Russia sanctions it’s clear that the sanctions regime has not crippled Russia as intended however inconvenienced seems closer to the truth Russia has proven resourceful in mitigating evading or otherwise enduring the sanctions as evidenced by robust economic growth in 2023 and 2024 not to mention its continuation of the war in Ukraine sanctions though have nonetheless forced Russia to seek alter alternative methods of crossborder payment for international trade for example after the US and EU banned the exports of dollars and Euros to Russia in March 2022 the Yuan overtook them as the most traded foreign currency in the country however the US has since slapped secondary sanctions on foreign counterparties doing business with Russia making trade in any fiat currency quite difficult Russian businesses have since turned to using small banks in border regions with more pliable compliance divisions but the US is likely to punish them too so what other options does Russia have fans of Russia’s planned Central Bank digital currency or cbdc which is expected to launch in mid 2025 have suggested that it could be used for international trade detractors point out that digital or analog nobody wants rubles right now nor for the foreseeable future except maybe a few select trading partners fans of the brics group of countries will point to the much discussed brics currency as a solution however the bank of Russia has described bricks negotiations as quote difficult and acknowledged that establishing such a system will take time now trade can’t wait for a perfect solution but ironically a perfect solution has been under Russia’s nose all along crypto in hindsight Russia would have done well to start using BTC for international settlements as soon as sanctions began in 2014 but of course hindsight is 2020 and this would have been an extremely gutsy move at the time like most governments the Russian state has historically been wary of crypto most crypto policy is the result of a long tug of war between the bank of Russia which wants to ban crypto to clear the way for its cbdc rollout and the Ministry of Finance which doesn’t want to ban but instead wants to regulate crypto to within an chivot life one area of agreement though between the ministry and Central Bank is on the need to outlaw payments using crypto like BTC and eth the government followed through in 2020 with a ban on domestic crypto payments still this didn’t go far enough for the central bank which in 2022 reiterated its calls for a blanket ban and called crypto a quote def facto Ponzi scheme hold up a second there guy have changed by mid 2023 sanctions had persuaded both the central bank and finance ministry that the use of crypto for crossborder payments had become unavoidable work soon began on an experimental legal regime that would authorize the central bank to permit select companies to conduct crossborder settlements and exchange trading in digital currencies including crypto the Central Bank also started advocating for the use of homemed BTC for internet trade it even said it planned to create special organizations tasked with Mining and processing crypto payments for crossborder trade deals now it’s not clear if these organizations will see the light of day but it’s a remarkable about face from the bank of Russia it seems to have gone from anti-crypto activist to offthe grid Anarchist escaping the Fiat panopticon by mining BTC with its own fossil fuels and living off the proceeds I guess that’s what sanctions will do to you anyway the experimental legal regime came into effect in September 2024 and things have been moving quickly ever since in November President Putin signed a law classifying digital currencies as a form of property in foreign trade settlements and Russia also introduced its first Regulatory and tax framework for crypto mining by December Finance Minister Anton sanov was telling local media how Russian companies had already started using BTC and other digital assets for crossborder transactions the plan must be going swimmingly because sanov signaled that Russia plans to make crypto a larger part of its trade strategy in 2025 we can pay for the delivery of goods with digital Financial assets it is also possible to use Bitcoin which we mined here in the Russian Federation within the experimental regime such transactions are already occurring we believe they should be expanded and developed further I am conf confident this will happen next year now that reference to BTC minded in Russia itself is important by the way because if Russia is in fact mining its own BTC then it will be able to process its own BTC transactions this means that even if pressure is put on Miners and Mining pools to refrain from processing transactions from wallets associated with Russian entities then Russia has a workaround if they comply FYI some miners have in the the past attempted to censor transactions in this way now all this raises serious questions for those trying to coerce Russia with sanctions Ukraine was quick to react to sano’s announcement with one adviser to president zalinski announcing quote appropriate sanctions and other solutions to block the possibility of using unwanted cryptocurrency payments are already being prepared but is that even possible the answer will depend on how Ukraine intends to to block Russia’s use of crypto if it intends to freeze Russian assets and block transactions at the blockchain level then the matter of which cryptos Russia is using becomes Paramount the latest reports we have about Russia’s use of crypto for international payments specify that it’s using BTC quote and other digital assets we’d be very interested to know what these other assets are and the extent of their use viav BTC we know the digital rubble and Bricks currency are not circulating so we can rule them out when it comes to cryptos many if not most are unsuitable because they are in some way controlled by centralized entities that can be compelled by governments to censor transactions there are censorship resistant privacy cryptos like monero’s XMR but their High volatility and relatively low liquidity make them less desirable as a method of value transfer for international trade at scale under normal circumstances stable coins are the obvious cryptos of choice for international trade quite a lot of international trade is already conducted using usdt and usdc for the 24/7 instant and frictionless settlement they offer but the problem is that the world’s major stable coin issuers tether and circle are the exact opposite of censorship resistant both have the ability to freeze assets when compelled and have done so in the past despite tether’s reputation as an offshore and allegedly less compliant entity than us-based Circle it’s highly unlikely that any issuer of us dollar stable coins would side with Russia over the United States if put in such a position so this should make usdt and usdc risky and unsuitable for Russian businesses looking to circumvent Western sanctions one request from the US and Russian held usdt or usdc could be frozen pretty easily interestingly bloom ber reported last year that two of Russia’s top metal exporters were actually using usdt for crossb settlements because of difficulties arising from Western sanctions this sounds a lot like usdt is being used to circumvent Western sanctions by Russian villains in cahoots with tether then again this Bloomberg piece was kind of a non story because none of the parties to the transactions were themselves subject to sanctions as such they should be free to use stable coin without fear of censorship the only thing this story really tells us is that the sanctions regime is so far reaching that it impedes business between companies who aren’t even its intended targets now of course it’s possible that some sanctioned Russian trade is being conducted using stable coins Venezuela is allegedly using brokers in Dubai to receive usdt payments for oil exports if this is true and tether is not freezing the assets of the sanctioned parties involved then perhaps it’s a similar case for Russia but enough speculating are they using stable coins well maybe but it seems like a bad idea to us frankly we don’t know which non BTC cryptos they might be using but BTC is all they would ever really need BTC is a uniquely censorship resistant liquid and desirable asset no other crypto or asset has this same combination of properties as President Putin remarked late last year quote who can ban Bitcoin nobody no matter what happens to the dollar these tools will develop one way or another because everyone will strive to reduce costs and increase reliability he said indeed nobody can censor Russian BTC transactions nor freeze BTC on the Bitcoin network if Ukraine and its allies literally want to do this it would likely be the greatest stress test that crypto has ever seen but at this point orchestrating a 51% attack on the Bitcoin Network would be an implausibly vast undertaking and probably not worth the effort just to stop Russia from doing business a far more likely scenario would be Ukraine and its allies using onchain data to identify businesses and individuals partaking in Russia’s foreign trade and then targeting them in other ways sanctions sabotage assassination basically anything would be easier than trying to block BTC transactions on chain or you know maybe they’ll try just asking the exchanges to freeze the transactions in any case one of the biggest questions hanging over this whole situation is how the United States under a second Trump Administration will respond there are multiple overlapping issues at hand here because the incoming president is very Pro crypto very Pro US dollar anti- Ukraine war and arguably somewhat Pro Putin what will this mean for Russia’s International crypto trade well Trump has said repeatedly that ending the war is a top priority and something he could accomplish in a day when asked how he’s made reference to overseeing a deal but has declined to give specifics however Trump’s advisers are known to be keen on getting Ukraine to negotiate an end to the war and this implies making some kind of concessions to Russia Russia meanwhile is confident that it has the upper hand militarily and politically making it look likely that the war could end on terms unfavorable to Ukraine this will put Russia in a relatively powerful position but at the same time it will guarantee Russia’s continued status as a pariah the more Russia is treated as a pariah the more momentum there will be for dollarization Trump has indicated that countries pursuing this agenda will be punished with 100% tariffs and shut out of us markets some countries May capitulate in the face of this threat but it seems unlike ly that Russia would do so it’s more likely that the US’s willingness to wield dollar dominance as a geopolitical weapon will only make the dollarization agenda more urgent for countries like Russia as I mentioned earlier the prospect of dollarization manifesting as a bricks currency faces quite a few challenges if this currency ever sees the light of day it won’t be anytime soon for countries pursuing dollarization International Trade can’t be put on pause while brics figures this thing out so again there is a need for an immediate solution maybe it’s a stop Gap or maybe it isn’t but Bitcoin is already proving itself to be a very good solution to this problem if Russia’s experiment with crossborder payments in BTC goes well it seems a no-brainer that other countries will start using it for trade too separately if any powerful country but especially the US starts accumulating BTC as a strategic Reserve asset any questions about its status as a desirable asset like gold will be put to bed simultaneously confidence in the US dollar as the global Reserve asset will likely take a hit this too should give more momentum to the dollarization agenda as other countries follow suit accumulating BTC for their own reserves and as governments outside of the US sphere of influence become more familiar with owning and using BTC its utility for escaping Financial coercion at the hands of the US EU IMF bank for international settlements World Bank or whoever it may be will become a story even bigger the number go up so as 2025 begins crypto and geopolitics are spilling over into one another in ways only the truest of True Believers could previously have imagined powerful nation states are swallowing their pride and considering how crypto can solve some of their biggest problems different countries are drawn to crypto for different reasons some just happen to be led by Crypt browers others have turned to crypto out of pure necessity Russia is a standout example of the latter when push came to shove the same government and Central Bank that sought to ban or tightly restrict crypto found that they needed it to survive whatever you think of governments accumulating BTC as a reserve asset to hedge against inflation or El Salvador recognizing BTC as legal tender it’s hard to make the case that these policies are Urgent in the same way that Russia urgently needs a method of transferring value across borders that is censorship resistant frictionless and untethered to the fortune or whim of any government Satoshi probably never imagined that Waring States would adopt BTC for international trade and we can only guess as to whether or not he or she would approve but at the same time it’s hard to imagine a more perfect use case for Bitcoin Russia’s sanctions evasion through BTC represents censorship resistance on a massive scale it’s the ultimate escape from the global theat Ponzi put aside any thoughts you have on the moral ins and outs of this it’s not the first time that Bitcoin strengths have been showcased in a way that most people may find unpalatable btc’s used to buy illicit stuff on the dark web back in the day wasn’t up everybody’s Street either but again perfectly showcased Bitcoin strengths the same is now happening on an international rather than an individual level which is kind of amazing when you think about it then again before we get too emotional let’s remember that the Russian government is no friend of crypto per se it’s planning its cbdc rollout for this July and won’t allow its own citizens to trade or pay for stuff using crypto ironically the same new legal regime that made possible Russia’s use of crypto in foreign trade also introduced additional demestic bans on Advertising crypto and offering crypto to an unlimited number of people Satoshi must be turning in their bed or grave not sure anyway I think the idea was originally to empower individuals not repressive governments but well it is what it is Bitcoin works just the same for everybody and that’s kind of the point it’s an L for sanction an L for Ukraine and an L for ordinary users of crypto denied freedoms by their government in Russia but it’s a win for bitcoin’s neutrality and utility at scale Russia may be the first country to officially use BTC for international trade but it won’t be the last but well maybe that’s just me maybe President Putin is going to find out how expensive transaction fees on the Bitcoin Network can get and throw the whole plan out of the window in disgust it wouldn’t be the first time something he dislikes ends up falling out of a window but I don’t know what do you
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