Russian government shows support for cryptocurrency use

Russia is experiencing a surge in the adoption of cryptocurrencies as its citizens and government seek alternative options to the US dollar. Russian economics professor Igor Belskikh believes that mass adoption of cryptocurrencies is coming to Russia, citing the ability to transfer funds abroad without having to declare them to the government and the inability of customs officials to seize coins from migrants as reasons for the growing popularity of cryptocurrencies in the country.

In addition to these benefits, Belskikh notes that thousands of Russians have already used cryptocurrencies as a discreet tool in currency exchanges, including to purchase real estate, stocks, and bonds, and to pay for education. The Russian government has also demonstrated support for the use of cryptocurrencies, with company Lighthouse recently issuing $8.3 million worth of "digital financial assets" secured by commercial debt and the Central Bank expressing approval for crypto-related pilots.

The increasing adoption of cryptocurrencies in Russia may also be influenced by the country's desire to find alternatives to the US dollar due to sanctions that aim to freeze Russia out of the dollar-powered global economy. In this context, the rise in digital yuan holdings in Russia is also worth noting. Currently, VTB Bank has 7% of its foreign currency deposits in yuan, while Tinkov Bank has 1%. The number of Russian banks providing yuan services has increased from 13 at the start of 2022 to 50, and it is suggested that interest in digital yuan holdings in Russia could increase if citizens are able to bypass banks and buy e-CNY via apps on their phones.

China, which is testing cross-border interoperability of the digital yuan in a Hong Kong pilot, is also potentially looking to use the digital currency to boost its "petroyuan" plans to create an alternative to the US dollar in oil trading. Both Russia and China have been de-dollarizing, with gold-buying reaching record highs in 2022. There is speculation that the two countries may potentially use their respective digital currencies, the digital ruble and digital yuan, in trade deals with each other.

The adoption of cryptocurrencies and digital currencies in Russia and China is a significant development in the global financial landscape. While the use of traditional fiat currencies such as the US dollar has dominated international trade and finance for decades, the rise of alternative options may signify a shift towards a more diverse and decentralized financial system. It will be interesting to observe how the adoption of cryptocurrencies and digital currencies in Russia and China progresses in the coming years and the potential impact it may have on the global economy.