- 98% of Chinese banks refuse Yuan transactions with Russia due to fear of US sanctions.
- Russian businesses turn to cryptocurrencies to maintain international trade.
Despite Russian President Vladimir Putin’s claims that 80% of trade with China is conducted in Yuan, new reports reveal significant payment challenges. Since July of last year, small regional Chinese banks have been refusing payments from Russia, and 98% of Chinese banks are not conducting direct Yuan transactions with Russia.
The situation has worsened in recent months, particularly after the tightening of US sanctions against Russia. Chinese financial institutions have started dividing incoming Yuan into “clean” and “dirty” (associated with Russia) and rejecting the latter.
Russian businesses report difficulties in making payments in Yuan and receiving payments from China. In response, they have turned to cryptocurrencies.
Cryptocurrencies as the New Solution
The original plan of Russia and China for de-dollarization was to promote the use of the Yuan in trade. However, given the current difficulties, Russian businesses are seeking alternatives. Some are working with payment agents who process transactions through third countries, while others are sending payments to China via banks in Hong Kong.
Hong Kong has become a buffer zone of sorts, as there are organizations there that specialize in handling transactions with Russia. However, even these organizations are starting to refuse to cooperate.
This situation paves the way for the use of cryptocurrencies in trade between China and Russia, particularly through exchanges in Hong Kong, which has favorable regulations for Bitcoin.
Russia recently passed a law legalizing cross-border payments with cryptocurrencies. The law obliges the Russian central bank to establish a platform for international cryptocurrency transactions.
These payments and the new platform appear to be a temporary solution while Russia and China, along with the other BRICS countries, develop a payment system using central bank digital currencies (CBDCs).
The US has already threatened sanctions against Russia’s cryptocurrency plan. Nevertheless, Russian entrepreneurs are eager to take advantage of the government’s permission to use cryptocurrencies and stablecoins.
The future of Russian-Chinese trade seems to lie increasingly in the blockchain, as traditional financial channels are blocked by sanctions. It remains to be seen how this development will affect the global financial landscape and the role of cryptocurrencies.
