Blockchain analytics firm Chainalysis has revealed that Russia is developing a cryptocurrency-based financial infrastructure to bypass Western sanctions. According to Chainalysis’ latest policy and regulation report, the Central Bank of Russia (CBR) is leading efforts to facilitate international trade using cryptocurrencies. These initiatives follow the Russian parliament’s passage of laws legalizing crypto mining and allowing crypto for cross-border payments, signed by President Vladimir Putin on August 8.
Chainalysis noted that these measures are part of Russia’s broader strategy to create alternative payment systems that reduce reliance on the U.S. dollar, especially as geopolitical tensions with the West escalate. Trial cross-border crypto transactions overseen by the CBR are set to begin this month, with the digital ruble, Russia’s central bank digital currency (CBDC), expected to be fully launched by 2025.
Russia’s Crypto Integration for International Trade
The new legislation enables approved Russian businesses and entities to settle international trades using cryptocurrencies, potentially providing Russia with a means to mitigate the impact of sanctions. Chainalysis Director of Investigations Valerie Kennedy explained that the CBR is building an experimental infrastructure for these cross-border payments, with the aim of integrating crypto into Russia’s financial system.
Some Russia-based centralized crypto exchanges could play a key role in processing these transactions, according to Chainalysis. Non-KYC exchanges like Tetchange, 100btc, Bitzlato, Suex, and Garantex which have offices in the Moscow International Business Center are positioned to facilitate these payments. Garantex, in particular, is seen as a potential tool for the government to use in evading sanctions due to its liquidity across major blockchains.
Another platform, Exved, which collaborates with InDeFi Bank co-founded by Garantex founder Sergey Mendeleev, could also be employed for sanction-evasion purposes. Exved has reportedly been facilitating imports and exports even before the new laws were enacted.
Blockchain Complexity and Transparency
Although Russia’s push for a new crypto-based cross-border payment ecosystem presents challenges for investigators, Chainalysis stressed that the inherent transparency of blockchain technology would still allow for a detailed analysis of Russia’s efforts to evade sanctions.
Russia’s Broader Sanctions Evasion Efforts
Russia’s exploration of cryptocurrency aligns with other initiatives aimed at skirting sanctions, including blockchain collaborations with the BRICS community and discussions with Iran about launching a gold-backed stablecoin. The country has also been developing the Financial Messaging System of the Central Bank of Russia (SPFS) as an alternative to SWIFT, though its adoption remains limited.
This marks a notable shift in Russia’s approach to cryptocurrency. As recently as 2022, the CBR had advocated for a complete ban on digital currencies. Despite these recent legislative advancements, the ban on using crypto for domestic payments within Russia is still in place.
