Russia's Breakthrough Under Financial Sanctions: Legalizing Crypto Mining and Cross-Border Payment Strategies
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Russia's Breakthrough Under Financial Sanctions: Legalizing Crypto Mining and Cross-Border Payment Strategies
In recent months, Russia's policy has undergone a complete 180-degree shift, introducing various legislative measures and official statements recognizing digital currency as a highly promising economic sector. Russia must seize this opportunity and swiftly establish a legal framework and regulatory system.
Navigating Web3 tides with focused insightsAuthor: Aiying Aiying
Just two days ago on August 8, Russian President Putin signed a bill officially legalizing cryptocurrency mining in Russia. The legislation introduces new concepts such as digital currency mining, mining pools, and operators of mining infrastructure. Earlier at an economic conference, Putin explicitly stated that digital currencies represent a highly promising economic sector, and Russia must seize the opportunity by swiftly establishing a legal framework and regulatory mechanisms.
Rather than interpreting this as part of a grand strategic vision by Russian authorities, Aiying Aiying prefers to see it as Russia’s attempt to break through under intense international sanctions and economic blockade.
1. Cross-Border Payment and Settlement Challenges in China-Russia Corporate Trade
In early 2024, as Western enforcement of sanctions intensified, major Chinese banks began feeling mounting pressure from the United States—particularly regarding their position in financial markets and the dollar clearing system. As a result, banks adopted more cautious measures. Several large Chinese banks started restricting USD transactions related to Russia, especially cross-border settlements in dollars, significantly cutting back or completely halting credit services for companies doing business with Russia.
According to Aiying Aiying, around June 12, due to expanded U.S. secondary sanctions on Russia, some mid-sized and smaller banks with strong Russia ties—such as Hunchun Rural Commercial Bank and Russia’s VTB Bank—have stopped accepting inbound cross-border remittances, suspended account openings, and even existing corporate accounts are unable to receive payments normally. VTB has been placed on the U.S. Department of Treasury's Office of Foreign Assets Control (OFAC) sanctions list. Executives from three Russian commodity exporters told Bloomberg that after the latest round of U.S. sanctions, direct payments from China to Russia have become extremely difficult, if not impossible—even when using RMB.
The payment issue affects not only bulk commodities like metals and agricultural products but also other industries. Aiying Aiying learned from some enterprises that goods such as Chinese auto parts and agricultural machinery frequently fail to reach their destinations due to payment issues. What used to take just one or two days for payment settlement now faces delays of one to three months due to extensive procedures and checks. Suspicion over whether certain products have dual civilian-military use causes even longer delays, and transaction failures due to incomplete documentation have become common occurrences. Last week, the Russian Automobile Dealers Association warned that importation of Chinese vehicles and auto parts might be suspended due to settlement difficulties.
A recent report released by the Chongyang Institute for Financial Studies at Renmin University, titled “Creating New Channels—Current Status, Challenges, and Recommendations for Two-Way Investment between China and Russia,” mentioned that between February and March 2024, due to threats of Western secondary sanctions, both SPFS and CIPS RMB-ruble transactions were halted; by March this year, 80% of transactions had been blocked. This aligns closely with what Aiying Aiying has heard from businesses: Chinese funds cannot enter Russian accounts, and Russians themselves cannot make payments.
2. Cross-Border Payment and Settlement Between China and Russia Is a Major Problem
According to statistics compiled by Bloomberg, last year China accounted for about 28% of Russia’s total trade volume, up from 19% in 2021. In contrast, the EU’s share in Russian trade dropped from 36% to 17% during the same period.
In May, the RMB accounted for 53.6% of trading volume on Russian exchanges. However, the latest U.S. sanctions implemented in mid-June forced the exchange to suspend USD and EUR trading. As a result, the RMB’s share in Russia’s foreign exchange market surged to 99.6%, with nearly all transactions settled in RMB.
In the over-the-counter (OTC) market, USD and EUR still circulate. In June, OTC trading volume slightly declined to 13 trillion rubles, while the RMB’s share rose by 0.8 percentage points to 40%. Sales by major exporters remained high, reaching $14.6 billion (approximately S$19.7 billion) last month.
From these figures, it is clear that without proper solutions to funding settlement issues, Sino-Russian trade will continue to negatively impact Chinese enterprises, causing significant economic losses.
The current cross-border payment and settlement challenges between China and Russia resemble a financial traffic jam—one far more problematic than logistical bottlenecks, since payment and settlement form the circulatory foundation of bilateral trade.
3. Breaking Through with Cryptocurrency-Based Cross-Border Payments
Against this backdrop, both China and Russia are exploring new payment methods to overcome sanction-related barriers. According to Aiying Aiying, some companies active in Sino-Russian trade initially focused on importing Chinese consumer goods into the Russian market. These goods include daily necessities, electronics, clothing, and household items. They have established robust logistics and distribution networks enabling rapid entry of Chinese goods into Russia. However, recent sanctions have caused settlement difficulties and declining trade volumes.
Initially, companies found that small regional Chinese banks—due to their limited scale and exclusion from direct international sanctions—could handle Russia-related payments more flexibly. Operating mainly at the local level with narrow business scopes, these banks could relatively smoothly maintain operations under the international sanctions radar. But as sanctions deepened, these methods became increasingly restricted, prompting companies to explore more innovative alternatives—virtual currency-based cross-border payments. After experimentation, many began using digital assets and cryptocurrencies for settlement, bypassing traditional banking systems. By using Tether (USDT), payments can be completed within a day, greatly simplifying processes and reducing overall transaction costs.
4. Russia Introduces Supporting Policies and Legislation for Crypto Cross-Border Payments
1. Anatoly Aksakov, Chairman of the State Duma Committee on Financial Markets, predicted that Russian citizens will eventually be able to exchange Bitcoin for digital rubles.
2. Russia is actively promoting the application of the digital ruble. The digital ruble has already made significant progress in its pilot phase, and President Putin strongly supports it, hoping to accelerate its integration into the economy.
3. Elvira Nabiullina, Governor of the Central Bank of Russia, said in an interview: "By 2031, CBDCs will become part of everyday life. The digital ruble offers advantages such as free or low transaction fees, which will drive adoption."
4. The Russian Duma passed a law in second and third readings allowing cross-border cryptocurrency settlements and exchange trading under an experimental legal regime (EPR) starting September 1, 2024. Read more: [Crypto Payments] Russia to Allow Cryptocurrencies for Cross-Border Transactions Starting September
According to Izvestia citing reports from the Central Bank of Russia, the government is actively considering legalizing stablecoins in international transactions to simplify and facilitate cross-border payments for Russian companies. Read more: Russia Considers Permanent Legalization of Stablecoins for Cross-Border Payments, Paving Way for New International Trade Landscape.
It should be noted that prior to 2017, the Russian government and central bank held an extremely cautious stance toward cryptocurrencies. Cryptocurrencies and mining were seen as highly risky, primarily due to concerns about illegal activities such as money laundering and terrorist financing. The central bank repeatedly warned the public against investing in Bitcoin and other cryptos, citing extreme price volatility and high financial risks. In 2020, Russia passed the “Digital Financial Assets Law,” which recognized cryptocurrencies as property but prohibited their use in purchasing goods and services. However, in just the past few months, Russian policy has undergone a 180-degree shift, introducing various laws and statements declaring digital currencies a highly promising economic field, urging swift establishment of legal frameworks and regulations. Subjectively, Aiying Aiying believes this shift likely reflects tangible success achieved by Russia in using virtual currencies as a breakthrough mechanism under sanctions.
5. Can Crypto-Based Cross-Border Payments Perfectly Circumvent Sanctions?
This is a compliance question commonly raised, given that global rules—especially in finance—require adherence to FATF anti-money laundering guidelines and laws like the Bank Protection Act. Does this mean crypto is exempt? If not, can such a solution still hold?
This leads to deeper operational details that cannot be fully explored here. Instead, consider a question posed to Aiying Aiying last week by Foresight: Is the increasing entanglement between cryptocurrency and politics beneficial or detrimental? On one hand, cryptocurrencies like Bitcoin champion decentralization; on the other, growing political involvement pulls them back toward centralized power structures. In the context of crypto-based cross-border payments, centralized rule-makers will use every means—technical tools, licensing regimes, anti-money laundering regulations—to bring these systems back under their sanctioning authority, preserving the deterrent power of sanctions. This may disappoint those who dream of “freedom and innovation.”
Aiying Aiying sees this relationship as “love-hate.” While the crypto industry originated in decentralization and revolution, capital is pragmatic—it doesn’t care about revolution as long as it delivers hundredfold returns. Thus, capital naturally engages in political lobbying, drawing power players into the game to act as protectors and shape favorable rules. Is this bad for crypto? Not necessarily. It resembles the Trojan horse—slowly infiltrating and reforming the existing financial system from within. Take cross-border payments: setting aside ethics and politics, stablecoins like USDC and USDT represent the dollar and uphold dollar-based settlement rules, yet paradoxically, they’ve also become one of the most effective tools for sanctioned countries to circumvent restrictions—an act of counter-power or backlash against the old order. After the U.S. government sanctioned the crypto mixer Tornado Cash two years ago, platform activity sharply declined. Yet according to blockchain analytics firm Flipside Crypto, in the first half of 2024 alone, the protocol received over $1.8 billion in deposits—about 45% higher than the entire previous year. In a way, it represents a successful “breakout” under centralized authority.
Therefore, the question of whether Bitcoin, stablecoins, and other decentralized blockchain derivatives—the “wild horses” of finance—can truly be tamed, and who is changing whom, remains open. This is a dynamic process: the emergence of crypto payments introduces a new variable into the traditional monetary settlement system. Combined with shifting geopolitical cycles, this variable now meaningfully challenges the Bretton Woods system and the dollar-dominated international monetary order. Today’s solutions are thus the product of ongoing博弈 (strategic contest).
6. Uphold Principles While Seeking Innovation
Naturally, adhering to core principles must remain the foundation. While crypto payments offer breakthrough potential, they also create safe havens for criminals. As previously discussed by Aiying Aiying in a case study titled Cambodia Huione Guaranty: A Multi-Billion Dollar Money Laundering Platform for Online Scammers, using digital currencies for legitimate trade settlements requires enhanced anti-money laundering capabilities and strict compliance with local regulations to prevent enterprise accounts from being exploited as money laundering conduits—a costly trade-off.
We look forward to leveraging new technologies like crypto payments to revolutionize outdated traditional settlement systems and reshape unjust global financial rules. Aiying Aiying will continue monitoring global developments in crypto payments and traditional settlement systems, and welcomes WeChat discussions.
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