Russia pays China in cryptocurrency for goods it needs for war

The Russian authorities have started to switch trade with China to cryptocurrencies.

Source: The Moscow Times

Details: The first group of importers to be allowed to pay for Chinese goods in digital currencies under an experimental legal regime included electronics manufacturers, some members of the Russian Chamber of Commerce and Industry and several banks.

It is noted that, first of all, the authorities selected companies that purchase dual-use goods which can be used for both peaceful and military purposes from China. 

It was these importers who had previously experienced the greatest difficulties with payments to banks in China and other countries. The government also selected companies with the highest turnover.

The changes make it possible to conduct exchange trading in cryptocurrencies under the supervision of the Russian Central Bank. The Central Bank and the Ministry of Finance are responsible for forming the circle of persons involved in the work of the experimental legal regime.

It is reported that the Central Bank is not currently allowing medium-sized businesses to join the experimental legal regime. 

Russian law does not prohibit the purchase of cryptocurrencies and payments with foreign counterparties even without the experimental legal regime, but companies still face uncertainties and legal risks. An important element of the said regime is the simplified procedure for converting cryptocurrencies into fiat money through banks. [Fiat money is a government-issued currency not backed by a physical commodity – ed.]

However, it is expected that attempts to use cryptocurrency to circumvent sanctions will be quickly detected, as all transactions in the blockchain are open to verification. This will quickly bring the Russian authorities' experiment to a fiasco. Therefore, the experimental legal regime should be strictly focused on activities that do not fall under sectoral sanctions and on working with countries that have not imposed restrictions on Russia.

Read more: Russia has legalised cryptocurrencies. Will this help the Russians evade Western sanctions?

Background:

• After local banks in China refused to accept payments from Russia, the number of banks that do not accept Russian money has exceeded 98%.
• Putin asked for a meeting with Chinese leader Xi Jinping in view of the major problems with bank payments between Russia and China.

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