Russia Considers Including Bitcoin in Strategic Assets... China's 'Digital Yuan' Initiative

Russia's use of Bitcoin for trade payments is expected to accelerate the BRICS bloc's move away from the dollar. Russia aims to bypass Western financial sanctions against it by using digital currencies like Bitcoin, while also challenging the U.S. dollar's dominance. With U.S. President-elect Donald Trump planning to retaliate against countries attempting to replace the dollar with high tariffs, conflicts between the U.S. and the BRICS bloc are expected to intensify.

On the 25th (local time), the U.S. economic journal Business Insider reported that "Russian companies have found another way to avoid Western sanctions on trade payments through cryptocurrencies." Bitcoin, with its core principle of 'decentralization,' can bypass financial sanctions by evading Western surveillance.

Western countries, led by the U.S., excluded Russia from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) following Russia's invasion of Ukraine in 2022. With dollar payments, which account for the majority of Russia's foreign trade, being blocked, Russia has been enduring by settling in Chinese yuan or resorting to smuggling.

In August, Russia passed a law recognizing cryptocurrencies as assets. The key is imposing a maximum 15% personal income tax on income from cryptocurrencies like Bitcoin, while exempting value-added tax on cryptocurrency mining. This strategic decision by Russian President Vladimir Putin reflects the necessity to use cryptocurrencies to reduce dependence on the dollar, as the U.S. uses the dollar for political purposes.

President Putin emphasized at the VTB Investment Forum held in Moscow on the 5th of this month, "Who can ban Bitcoin?" and stressed, "No one can ban it."

Furthermore, it is known that the Russian government is considering including Bitcoin in the national strategic reserves. According to the cryptocurrency specialist media CryptoPotato, Russian lawmaker Anton Tkachev recently sent a proposal to Finance Minister Anton Siluanov to "evaluate the feasibility of creating Russia's strategic Bitcoin reserves in the same manner as traditional currency reserves." The proposal includes the notion that Bitcoin, whose price has recently surged, could become a major revenue source for strategic reserves. The 'New People,' to which Tkachev belongs, is considered a controlled opposition party in Russia.

Along with cryptocurrencies, Russia is also focusing on CBDCs as a key tool for de-dollarization. CBDCs are digital currencies issued by central banks to replace physical currency. Russia proposed the establishment of a CBDC payment system called 'BRICS Bridge' at the BRICS summit held in the country in October.

CBDCs have the advantage of aligning interests with China, which is negative about cryptocurrencies. China, which has already embarked on the commercialization of the CBDC system, has revealed its ambition to make the 'Digital Yuan' the next-generation key currency.

The U.S. is extremely wary of the BRICS alliance threatening the dollar's dominance with CBDCs and other means. President-elect Trump warned last month, "BRICS countries must promise not to create a new currency," and "otherwise, they will face a 100% tariff."

Therefore, there are predictions that it will be difficult for Russia's Bitcoin trade transactions to become active. Unlike Russia, which is under financial sanctions, other BRICS member countries like China, India, and Brazil are actively trading in dollars with Western countries, including the U.S. Moreover, Bitcoin's volatility makes it difficult to use in trade transactions.

However, there are also forecasts that if the Trump administration strengthens protectionism in its second term, the international use of the dollar will decrease, leading to more active de-dollarization movements like Bitcoin trading. Steven Blitz, chief economist at TS Lombard, predicted, "President-elect Trump's tariff policy will weaken the dollar's power."

Silicon Valley correspondent Song Young-chan / Reporter Han Kyung-jae 0full@hankyung.com