Russia Considers Accepting Bitcoin For Oil and Gas

The headline is Bullish for Bitcoin of course, but when you go into detail in the statement of Pavel Zavalniy, Chairman of the State Duma Committee on Energy, you will see that it is less Bullish than it sounds.

What exactly did he say?

Zavalniy said that he would propose payment in BTC as a possible choice in addition to payment in ruble/local currency only for “friendly” countries of Russia. For “unfriendly” countries, Russia will require payment for oil and gas in the ruble.

Who are the friendly countries Zavalniy is talking about? China, Turkey, and India.

China has banned Bitcoin in 2021. I doubt that it will accept to pay for Russian oil in Bitcoin. What signal would that send to its population? Turkey will opt for payment in ruble/lira. Finally, India has already opted for payment in rupee/ruble.

Zavalniy’s statement should therefore be taken for what it is: a way to retaliate against Western sanctions against Russia. A way to put pressure on the West by brandishing the Bitcoin threat. A threat that is very real, insofar as the Bitcoin system would be perfect as a means of P2P payment whose transactions cannot be censored.

However, it may be a bit early for Bitcoin to be used in this way. It will surely be in the future, but I see it more in the medium term. So, here are the 3 big reasons why we shouldn’t get too excited about this announcement from Russia:

1. Russia has added constraints on which countries can eventually pay for their important Russian hydrocarbons in Bitcoin, so this would probably not be used by any country.
2. The Bitcoin market is not yet mature for such transactions. Above all, America could then sanction countries that exchange their U.S. dollars for Bitcoin and then send it to Russia.
3. Many countries are wary of Bitcoin. To agree to use Bitcoin would be to legitimize it in the eyes of their people. Something that countries like India absolutely do not want.

However, there are plenty of other reasons to be Bullish on Bitcoin. Let’s be Bullish, but let’s be Bullish for the right reasons.