While the United States regulators have continued to see cryptocurrency as a major threat, other countries, such as Russia, are beginning to pay attention to the technology’s potential while experimenting with its potential.
In recent years, sanctions have become an increasingly common tool countries use to exert pressure on their political rivals. The impact of these measures has been significant for Russia, as several rounds of economic sanctions have targeted it in response to the invasion of Ukraine.
However, despite its challenges, Russia is now looking to use cryptocurrency to help it bypass these restrictions and conduct cross-border transactions.
Crypto As A Tool For Cross-Border For Cross-Border Transactions
Speaking at a recent conference, Deputy Finance Minister Alexei Moiseev stated that while cryptocurrency is an “evil” in general, there may be separate situations where it can be used effectively.
In particular, Moiseev pointed to the potential of cryptocurrency in foreign trade activities and noted that a relevant bill is currently being considered by the State Duma Committee on the Financial Market.
If the bill is adopted, a committee will include representatives from several ministries, the Bank of Russia, and law enforcement agencies. This committee will permit individual operators to use cryptocurrency in foreign trade transactions, creating a legal framework for the experiment.
It should be noted that the process of providing a legislative framework for this experiment may be delayed until the end of the year, according to Moiseev. Nonetheless, the move represents a significant step for Russia in using cryptocurrency to bypass sanctions and conduct cross-border transactions.
Before this news, The Russian News Agency (TASS), the Bank of Russia, and the Ministry of Finance in Russia have since acknowledged in February that due to the international sanctions imposed on the country to exclude it from the global payment infrastructure that relies on the US dollar, the use of crypto payments cannot be rule out.
Challenges Of Using Crypto For Cross-Border Transactions
While the use of cryptocurrency for cross-border transactions offers several potential benefits, significant challenges also need to be considered. For example, the volatility of cryptocurrencies such as Bitcoin can make it difficult to assess the value of transactions accurately and may lead to unexpected losses or gains.
Additionally, the lack of regulatory oversight in the cryptocurrency industry can create a significant risk of fraud or other criminal activities. This is particularly relevant for cross-border transactions, where identifying and holding bad actors accountable may be difficult.
Despite these challenges, however, the potential benefits of using cryptocurrency for cross-border transactions are significant. In particular, cryptocurrency can help circumvent the limitations imposed by traditional financial systems and allow for faster, cheaper, and more efficient transactions.
Russia’s potential adoption of cryptocurrency for international trade could represent a significant step forward for the industry. While certain risks and challenges are associated with such transactions, the potential benefits are significant enough to make them a viable option for countries seeking to bypass sanctions, conduct other types of international trade, or stay caught up with Russia in adopting new technologies.
Meanwhile, the global cryptocurrency market cap has declined by 3.2%, with the sector’s total market capitalization slipping below the previously recorded $1.3 billion.
Featured image from Unsplash, Chart from TradingView