Russia and sanctions

News broke last week that Russia will likely begin allowing companies to use cryptocurrencies as a way of conducting international trade.

Why it matters: If a sovereign nation impacted by economic sanctions were to turn to cryptocurrency, that would be an indisputable real use case.

Background: Russia is under a heavy array of targeted sanctions by the West, in a coalition of dozens of countries, but it's not a wholesale blockade of the country.

• That said, Russia has pivoted to a full war economy, so sanctions targeted at such efforts reach almost everywhere now.
• The coalition has expressed a willingness to cut off companies that do business with Russia, even if they are not in a coalition nation.

Between the lines: Details for the legislation are still coming out.

• We spoke to Valerie Kennedy, from the investigations team at Chainalysis and a Russia expert, who said that her read of the legislation is that it will leave the details to the Russian central bank.
• It would also start on a limited level, as a test. That said, some level of crypto payments for international trade should happen this year, according to a speech quoted in the Russian press, by Elvira Nabiullina, of the Bank of Russia.

What they're saying: "This is a patriotic effort," Kennedy explained. "Whether or not this is going to be a large shift here remains to be seen."

• Looking at the conversations around the new legislation, she said a lot of the rhetoric speaks to this use of cryptocurrency being a way to support the strength of the Russian state.
• However, she expressed some doubt that there's enough money in the crypto system now to make a dent in trade at the scale of Russia's.

Yes, but: There could be a plan for that. Kennedy also pointed out that the founder of Garantex, a large Russian cryptocurrency exchange, launched Exved about a year ago, a company for moving funds between rubles, dollars and the stablecoin tether (USDT).

• Garantex has previously been specially sanctioned by the U.S. Treasury.

Meanwhile, there's still talk of a digital ruble, but that's a different topic. This legislation concerns permitting Russian businesses to use cryptocurrency to pay bills.

What we're watching: If there's a sharp increase in the supply of any particular stablecoin after the pilot of the trade program kicks in.