Russia Turns to Bitcoin and Other Cryptocurrencies to Circumvent Sanctions and Facilitate Oil Trade with China and India

Amid ongoing sanctions over the war in Ukraine, Russia has turned to bitcoin and other cryptocurrencies to facilitate some of its oil trade with major buyers China and India.

Amid ongoing sanctions over the war in Ukraine, Russia has turned to bitcoin and other cryptocurrencies to facilitate some of its oil trade with major buyers China and India, according to a Reuters report.

The report notes that Russian oil companies and traders are increasingly engaging in transactions using bitcoin and crypto to circumvent restrictions imposed by Western nations. Sources familiar with the matter say that monthly trade volumes are already reaching tens of millions of dollars.

The transactions typically begin with Chinese or Indian buyers purchasing oil and depositing yuan or rupees into an offshore account owned by a middleman company, usually in Hong Kong or an Indian Ocean island.

The middleman then converts the fiat currency into bitcoin or another cryptocurrency and transfers the crypto to an account in Russia, usually with a bank or trusted intermediary. The final step involves exchanging the crypto into rubles in Russia to complete the payment for the oil.

While crypto-based oil payments are still a small part of Russia's total oil trade, which amounted to $192 billion in 2024, the practice is growing as sanctions are having an impact.

The report further mentions that Iran and Venezuela have also adopted similar crypto strategies to continue their oil and gas trade despite U.S. sanctions. Bitcoin and crypto's properties of censorship resistance and open networks enable value transfer and transactions even where traditional financial systems are blocked or restricted.

In late 2024, Russia's finance minister, Anton Siluanov, publicly endorsed using crypto in foreign trade to circumvent Western sanctions. The Kremlin is considering several strategies to overcome financial penalties imposed over the invasion of Ukraine, and bitcoin and crypto are among the options being explored.

The Bank of Russia recently went a step further and proposed legalizing crypto investments for wealthy citizens to diversify their assets beyond traditional instruments. However, direct citizen crypto trading would require a complete ban on offshore outflows, which are currently used to evade Russian taxes and legal obligations.

Despite the growing use of crypto, Russia's oil trade still relies primarily on fiat currencies, and President Donald Trump's administration is debating whether to ease some restrictions on Russia to improve relations.

As the Ukraine conflict continues and Russia seeks to reduce its reliance on traditional finance and dollar settlements, the pivot toward bitcoin and decentralized technologies appears to be a natural step. It remains to be seen how closely other countries under U.S. sanctions will be monitored.