To maintain access to international markets in the face of Western economic pressure, Russia is increasingly turning to noncurrency payment schemes. The state has strong incentives to obscure its transactions and reduce reliance on fiat currencies (such as the dollar or euro) to evade sanctions and avoid scrutiny.
This month, the head of Rosfinmonitoring, Russia’s anti-money-laundering agency, publicly informed President Vladimir Putin that the government is reorienting international trade towards the Middle East, Southeast Asia, and Central Asia, and developing alternatives to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) international banking network with the former Soviet republics that are members of Commonwealth of Independent States. Russia also is “actively employing” alternative means of payment including gold, cryptocurrency, and netting, where multiple payments are consolidated to reduce the number of transactions and limit exposure. While these initiatives may be new, Russia’s use of cryptocurrency builds on a long history of nonfiat and illicit trade practices that have shaped its engagement with global markets.
A Long-Established Precedent
Russia’s international trade evolved alongside the exploitation of its natural resources—initially furs, then precious stones, metals, and energy products. Over time, this trade both stifled and stimulated the Russian economy. On the one hand, dependence on resource extraction discouraged economic diversification and private innovation. It also influenced Russia’s political development, since even today the most important revenue-generating companies in Russia are controlled by individuals close to the Kremlin. On the other hand, resource wealth underpinned Russia’s international trade and enabled it to exchange precious metals and stones—principally gold and diamonds—for money and, later, for Western technologies (PDF), often through opaque or secretive channels.
This practice of exchanging resources for technology is well established and dates back at least 150 years. It was during the Bolshevik era, however, that the trade became deliberately clandestine. During this period, gold and diamonds were favoured for their high value and portability. Western actors also engaged in this trade by selling the Bolsheviks technologies necessary for weapons production. By the 1980s, Russia’s energy trade with the West was more significant but gold and diamonds remained crucial for the Kremlin. Russia’s precious metals and stones are still prized today: the Gokhran (a state institution under the Russian Ministry of Finance) still maintains an undisclosed reserve in Moscow, available for use at the President’s discretion.
During the high period of Russia’s integration with the global trading system—which developed under Putin’s early leadership and survived the first wave of Western sanctions in 2014—Russians continued to find ways to transfer money illicitly. The Danske Bank and Swedbank cases, in which European banks became hubs for laundering Russian funds, are indicative. More recently, no-KYC (Know Your Customer) cryptocurrency exchanges have emerged which enable Russians to “on- and off-ramp (PDF)” fiat currency from sanctioned banks to crypto anonymously. Chainalysis data indicates that over 100 such exchanges were in operation in 2024. Russia’s efforts to move financial assets internationally have always involved considerable scheming.
Harnessing Finance for New Technologies
Russia has always prized currencies that afford secrecy, and it has consistently leveraged its resource base to procure goods and technology it cannot produce domestically. The Kremlin recently prioritised reducing its reliance on foreign technologies in its Science and Technological Development Strategy, but history suggests it will struggle to achieve this. There is little evidence that its import substitution policy has achieved major technical breakthroughs, for example, so it will likely continue to develop schemes to acquire it from overseas.
The tension between Russia’s wish to develop world class technologies, and its tendency to suppress innovation, is a crucial feature of Russian political culture. While Russia is capable of technological innovation, such advances typically occur in state-controlled sectors like the military, nuclear energy, and space on the basis of large-scale investment. Russia’s engagement with blockchain technologies follow this pattern. In 2022, before the wartime utility of crypto became clear, the Central Bank of Russia expressed doubts about the technology, describing it as risky. It issued a report (PDF) declaring that the “potential for cryptocurrencies for settlements seems limited,” and that they “have signs of a financial pyramid, as an increase in their prices is largely driven by demand demonstrated by new market participants.” This official pessimism reportedly did not prevent Russia’s domestic intelligence agency from lobbying for Russian algorithms to be included in international blockchain standards. This is an example of how the state tends to seek to control innovative technologies, rather than encourage their development.
Western economic pressure has changed this calculus. By July 2024, the Duma had passed a law allowing the use of cryptocurrencies in international settlements, effectively permitting crypto for sanctions evasion, and Putin announced the legalisation of crypto mining in August. Russian institutions now routinely use the language of “alternative payment methods” and the largest banks are now offering various crypto services. In recent days Sberbank, Russia’s largest and most important retail bank, affirmed its support for alternative payments and its intention to offer custody services, thereby offering a sovereign storage to its crypto customers.
As RAND Europe research into Russia’s wartime use of gold noted, the state tends to encourage rather than suppress entrepreneurship during crises, bucking its usual posture in times of peace. Its new enthusiasm for crypto—a Western innovation—is indicative of this trend. Putin is now a vocal cryptocurrency advocate. At December’s annual Russia Calling investment forum, he claimed that “no one can prohibit the use of Bitcoin.” Incidentally, Russia Calling is run by VTB, the sanctioned bank that Yuri Chikhanchin (Head of the Federal Service for Financial Monitoring) name-checked in his discussion about alternative currencies with Putin last month. Olga Skorobogatova, who oversaw (but left unfinished) the development of a Central Bank Digital Coin (CBDC) at the Russian Central Bank, recently joined the VTB board, where she is charged with developing the bank’s international payment infrastructure.
As the state embraces crypto, revelations about Russian crypto-related schemes have become more frequent. In September 2024, Germany’s Federal Criminal Police seized the infrastructure of 47 no-KYC cryptocurrency exchange services under “Operation Final Exchange.” Despite relying on servers based in Germany, a subsequent investigation by Chainalysis found that these exchanges catered primarily to a Russian clientele.
In addition to benefitting from Russia’s embrace of cryptocurrencies, there is evidence to suggest that key actors within the Russian banking system are spearheading efforts to further expand their use. Vladimir Potanin, a metals oligarch and the owner of Rosbank launched a service to enable international cryptocurrency transactions in June 2023 and has long been an advocate of developing digital tokens backed by commodities. Olga Skorobogatova’s appointment at VTB is another example of note, and it is a further sign of the times that Promsvyazbank, which was recapitalised by the state in 2018 as a supporting bank of the Russian defence sector, was found to be facilitating large-scale financial exchanges into and out of Russia via Kyrgyzstan using the ruble-pegged stablecoin.
Beyond the finance sector, cryptocurrency innovation is now visible across Russia’s strategic industries. Rosatom—perhaps Russia’s most technologically advanced company and a supposed leader in import substitution—has been implicated in a scheme to launder stablecoins in an effort to obscure the origins of funds and acquire sensitive technologies. In 2022, the major Russian defence conglomerate Rostec claimed to have developed a digital payment system that could replace the SWIFT network and has since launched a ruble-pegged stablecoin for international transactions. Rosselkhozbank has similarly raised the prospect of using cryptocurrency payments for grain settlements. Inevitably, Russia’s security services are using crypto in their operations in Europe. A recent Reuters investigation found that crypto wallets were used to pay teenage and novice spies operating on the continent.
A Challenge for the West
Russia is increasingly reliant on cryptocurrency to sustain international trade and circumvent sanctions. Its historic use of illicit commodities barter trading continues, but crypto-to-fiat transfers offer a more convenient and instantaneous means to transact internationally. Unlike barter, however, crypto leaves a digital footprint—prompting the proliferation of state-backed efforts to conceal transaction trails. Reliance on the shadow economy has long defined Russian business. Western pressure has pushed it further into the illicit sphere.
The challenge for the West is to allocate the resources required to trace Russia’s digital footprint, maintain economic pressure, and anticipate where its illicit trade could go next. It is ironic that Russia must rely on Western technology to undermine Western restrictions—and a sign of how little Russia offers the international market beyond crime and commodities. It is imperative that Western allies understand, map, and develop appropriate countermeasures to the crypto schemes that allow Russia to obfuscate its trading activity and fund its hostile activities abroad.
– John Kennedy is a research leader and Edward Bryan is a senior analyst at RAND Europe. Illimar Ploom and Viljar Veebel are researchers at the Baltic Defence College. Published courtesy of RAND.
