Russia's Decreasing Use of the Dollar May Create Opportunities for Crypto

Russia’s Decreasing Use of the Dollar May Create Opportunities for Crypto

As Russia plans to step down the use of U.S. dollars in the economy, a senior government expert has predicted a greater role for crypto.

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Geopolitical Strife Leads to USD Tensions

Since the United States and the European Union slapped economic sanctions on Russia in 2014 in the wake of Russia’s annexation of Crimea from Ukraine, senior Russian officials have been repeatedly talking about lowering the country’s dependence on the U.S. currency, which is heavily used by companies and private individuals alike.

This past July, the first step towards dumping the dollar from the Russian financial system was made as Andrey Kostin, head of major state-run lender VTB, proposed a scheme aimed at decreasing the share of dollar transactions.

Kostin’s proposal allegedly has become the basis of a governmental program focused on promoting the ruble for international transactions and lowering dependency on the greenback.

The proposal is expected to be approved by the country’s prime minister Dmitry Medvedev over the next two weeks, online magazine The Bell reported, who quoted sources familiar with the matter.

Will currency tensions boil over and cause Russia to look elsewhere?

Meanwhile, experts warned that an alternative to the dollar in international trade would be still needed as many countries and individual companies may be unwilling to immediately switch to trade in the Russian currency.

“Rejection of the U.S. dollar in international transactions without a drastic change in the technological approach to this issue is impossible,” Vladislav Ginko, an economist at the Russian presidential academy of national economy and public administration, was quoted as saying by iReactor news magazine.

‘The Only Solution Would Be … Cryptocurrencies’

According to Ginko, it is vital for Russia to be prepared for a possible scenario when the United States could cut dollar supplies to Russia.

However, as the nation currently has no strong viable alternative to the dollar, “the only solution would be a switch to transactions with our trade partners in cryptocurrencies,” he concluded.

The specifics of the plan for lowering the economy’s dependency on the dollar are yet to be made public, and it is not clear at this point if the plan mentions crypto at all. Still, Russia’s move to dump the dollar could push the government to become more serious in general about digital assets.

The most recent version of the country’s draft law on crypto and blockchain failed to define cryptocurrencies as a legitimate means of payment. But most of the work on the draft was done even before Kostin’s plan was announced and the current situation could be more favorable for crypto.

Meanwhile, the idea of using crypto by countries which are under U.S. sanctions is not new. Earlier this year, Venezuela suggested it could pay for Russian imports in its state-backed cryptocurrency, the petro, but Russian officials demurred.

What do you think? Will Russia shift to digital money amid its tensions with the U.S.? Let us know where you stand in the comments section below. 

Images via Pixabay

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