Russia’s sanctioned business union mulls establishing national Bitcoin fund

Russia’s sanctioned business association considers a national Bitcoin fund to enhance the use of digital financial assets in foreign trade.

The Russian Union of Industrialists and Entrepreneurs (RSPP), a sanctioned Russian union representing the country’s wealthiest business figures, is considering launching a national crypto fund to use crypto in foreign trades as Russian business explores options to circumvent Western sanctions.

In an interview with Russia’s newspaper Vedomosti, managing director of financial policy and financial markets at RSPP Andrey Lisitsyn said the fund would be based on Bitcoins (BTC) produced by local miners. Russia would then issue digital financial assets (DFAs) — basically centralized digital tokens — backed by this fund, enabling the legal use of cryptocurrency in cross-border transactions through IOUs rather than direct trades with the crypto itself.

So far, DFAs have failed to gain any significant traction in Russia despite efforts by multiple banks to woo retail investors. Although Bank of Russia Chair Elvira Nabiullina appears to be betting big on DFAs, she admitted in an early June press conference that the market suffers from a lack of liquidity, noting that it’s “too much fragmented.” As of June, the total market volume of DFAs surpassed 96 billion rubles (approximately $1.1 billion), a milestone that took the country two years to reach.

Lisitsyn explained that cross-border trades could be conducted through claims to the underlying crypto in the form of IOUs, preventing its circulation and avoiding speculative demand as crypto is banned in Russia as a legal tender. He added that the fund could be established in a special administrative region, allowing miners to open accounts and deposit mined Bitcoins.

However, Lisitsyn admitted that the scheme would require setting up multiple accounts on various global crypto exchanges to facilitate foreign trade, raising a “significant question” about the potential for these accounts to be blocked. To address this, he proposed creating a network of “payment agents,” though he didn’t elaborate on the details.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned the RSPP in August 2023, saying “Russian elites should disabuse themselves of the notion that they can operate business as usual while the Kremlin wages war against the Ukrainian people.”