Circumventing Sanctions: Will Moscow Legalize Cryptocurrencies?

Russia is apparently considering legalizing cryptocurrencies again. If Moscow processed its imports of sanctioned goods with virtual money, these would be even easier to conceal.

In fact, Russia’s central bank has always been skeptical about cryptocurrencies. It was only in July that the payment of goods and services with virtual money was banned by law. However, under the pressure of Western sanctions, a change of heart has now set in.

According to information from the State Duma, cryptocurrencies are to be legalized again in the coming year – primarily to mitigate the consequences of western sanctions. “(The cryptocurrency) can be used well in international payment transactions,” said the head of the finance committee in the Duma, Anatoly Aksakov, according to the daily newspaper “Kommersant” on Monday. Prime Minister Mikhail Mishustin had already declared in September that the responsible authorities would agree on a unified position on this issue by the end of the year.

“Parallel import” to circumvent sanctions

Aksakov has openly stated the reason for the change of heart: It is about securing the “parallel import”. That’s the official description of importing goods without the express permission of the manufacturer – essentially circumventing Western trade sanctions.

Parallel import is an essential tool in Russia’s procurement of urgently needed goods to keep Russian production going. The sanctioned goods are procured via third countries. In addition to armaments, these are mainly high-tech products and components for the electronics industry such as semiconductor chips, but also machines and systems.

Western control options limited

Trade experts also see an essential aspect of their effectiveness in the West’s ability to enforce its sanctions against third countries. But the control capacities and political influence on many third countries are limited, which suggests that these shadow imports are of a large scale. With the use of cryptocurrencies, it would be even easier to obfuscate such transactions.

Official trade data has not been published in Russia since the summer. According to a recent study by the Kiel Institute for the World Economy (IfW), more cargo is arriving at Russian ports despite the sanctions – mainly due to Chinese and Turkish deliveries.