Russian Central Bank endorses crypto for sanctions evasion

Russia's central bank has encouraged businesses to explore cryptocurrency and other digital assets as a means to facilitate international payments amidst Western sanctions.

The move comes as Russia grapples with significant setbacks in its trade relationships with non-sanctioning countries such as China, India, and the UAE.

Speaking at a financial conference in St. Petersburg, Elvira Nabiullina, governor of the Russian central bank, acknowledged that payment difficulties pose a crucial challenge to the Russian economy. "New financial technology creates opportunities for schemes which did not exist before. This is why we softened our stance on the use of cryptocurrencies in international payments, allowing the use of digital assets in such payments," Nabiullina was reported to have said by Reuters.

The central bank's endorsement of crypto follows recent Western sanctions targeting major Russian financial institutions, including the Moscow Stock Exchange and Russia's domestic alternative to SWIFT. These measures have severely impacted Russia's ability to conduct international transactions through traditional channels.

Nabiullina praised the adaptability of Russian businesses, noting their resourcefulness in finding solutions to circumvent sanctions. She also hinted at the development of a new global payments system that would operate independently of Western institutions, suggesting that many countries feel vulnerable relying solely on existing international payment systems.

The governor revealed ongoing discussions within the BRICS group of nations regarding the development of the BRICS Bridge payments system. This initiative aims to connect the financial systems of member countries, although Nabiullina cautioned that progress would be gradual due to the complexity of the negotiations.

Andrei Kostin, head of VTB, Russia's second-largest lender, advocated for heightened secrecy surrounding these alternative payment mechanisms. Speaking alongside Nabiullina, Kostin suggested that information about such systems should be classified as a "state secret" by law, citing concerns about Western surveillance and swift counteractions.

The central bank's endorsement of cryptocurrencies marks a significant departure from its previous scepticism towards digital assets and underscores the mounting pressure on Russia's financial system as it attempts to maintain economic ties with friendly nations despite intensifying Western sanctions.

Despite these efforts, the effectiveness and longevity of these measures remain to be seen, as Western nations continue to adapt their sanctions regimes to close potential loopholes.

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