Russia is using cryptocurrencies in its oil trade with China and India to dodge Western sanctions, Reuters reports citing unnamed sources.

As reported by bne IntelliNews, Russia passed legislation on crypto mining in August 2024, ending years of regulatory limbo in the sector. Russia is on the hunt to find an alternative to the US dollar to settle international trade deals and reportedly tested cross-border crypto payments.

After initially rejecting the idea of cryptocurrencies, the famously conservative Central Bank of Russia (CBR) eventually softened its stance on the potential use of cryptocurrency as a recognised means of payment.

This month the CBR also launched an experimental legal framework that would allow highly qualified" investors to trade cryptocurrencies, but stopped short of recognising cryptocurrency as legal tender. 

The report by Reuters is the first one to suggest that Russia is using crypto for oil trade.

Reportedly, unspecified Russian oil companies are using bitcoin, ether and stablecoins such as Tether to “smooth the conversion of Chinese yuan and Indian rupees to Russian rubles”, Reuters said citing unnamed sources.

While transactions supported by crypto are still small, they are reportedly growing. Reuters reminds that Iran and Venezuela are already allegedly using cryptocurrencies to avoid using the US dollar for energy transactions.

For a single Russian trader’s transactions with China the use of crypto could amount to “tens of millions of dollars per month”.

“In an example of how the trade works, a Chinese buyer of Russian oil pays a trading company acting as a middleman in yuan into an offshore account”, Reuters sources describe, adding that “the middleman converts this into crypto and transfers it to another account and from there, it is sent to a third account in Russia and converted to rubles”.

Russia has been increasingly hard hit by tough US financial sanctions that have affected trade and caused partners from Turkish and Chinese banks to pull out of Russia in 2024 due to fears of being hit by US secondary sanctions.

The Kremlin has been hunting for alternative payment means, but even the switch to the Chinese yuan has proven to be inadequate. The Central Bank of Russia (CBR) acknowledged last year that sanctions-related payment delays had become a significant challenge for the economy.

Notably, as followed by bne IntelliNews, this week the administration of US President Donald Trump has allowed the expiration of the US Treasury Office of Foreign Assets Control (OFAC) General License 8L, which previously permitted foreign companies to process payments for Russian energy resources through sanctioned Russian banks.

Depending on further sanction developments this could further complicate settlements for Russian energy trade and increase demand for alternative methods such as cryptocurrencies.

At last year’s BRICS summit in Kazakh Russian President Vladimir Putin featured a new BRICS Pay digital currency that could be used to settle commodities trades amongst the members, however, analysts say the appearance of the cryptocurrency is still several years away.