Crypto assets are increasingly being explored and used by sanctioned countries worldwide, highlighting the technology's growing role and the diminishing importance of traditional payment rails. However, a new report claims this is not a black-and-white issue.
While sanctioned countries seek to circumvent financial restrictions imposed on them, crypto assets are becoming an increasingly important instrument to achieve this goal, according to blockchain analysis company Chainalysis.
According to the report, the BRICS nations – Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran, and the United Arab Emirates – are creating payment infrastructure that would bypass traditional banking networks and the US dollar altogether.
While the BRICS countries are exploring a shared digital currency, Russia is already working on using stablecoins and central bank digital currencies (CBDCs) in trade with China and India. Both of these countries have already issued their CBDCs.
Meanwhile, Russia has also changed its laws to allow the mining or generation of various crypto assets. Moreover, starting in 2024, local companies can now officially use crypto assets for international payments. However, local banking giants such as Rosbank were experimenting with crypto payments even before the legislative changes, while the country's central bank aims to integrate crypto assets into Russia’s financial system.
"The strategic policy shift aims to ease the financial pressure of Western sanctions and enable global trade using cryptocurrencies. Despite maintaining a ban on domestic crypto payments, Russia remains one of the top-ranking countries on our Global Crypto Adoption Index," Chainalysis noted. In their latest ranking, published in September 2024, Russia ranks 7th, below only India (1st), Nigeria, Indonesia, the US, Vietnam, and Ukraine.
However, analysts stress that the use of crypto assets in bypassing sanctions is not a black-and-white issue, as this technology is also "an important financial lifeline for ordinary citizens facing economic hardship under restrictive regimes."
For example, in Iran, where local currency has been volatile and devalued, individuals and businesses are forced to look for alternatives to protect their wealth and engage with the international financial system.
"In 2024, Iranian services occupied a significantly larger share of sanctions-related crypto activity, fueled by rising distrust in the government and ongoing geopolitical instability," Chainalysis concluded, adding that outflows from Iranian services in 2024 grew by around 70% to $4.18 billion.
However, due to stricter regulations on centralized crypto platforms, it's becoming harder for regular Iranians to engage with the global crypto ecosystem.
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