Chinese regional banks, which were once used as bridges to process payments from Russia to China, have begun rejecting these payments for fear of secondary sanctions. To facilitate these transactions, cryptocurrency and even barter schemes have emerged as options to continue trading outside the dollar-dominated financial system.

Russian-Chinese bilateral trade is facing increasing difficulties due to the difficult task of settling transactions. According to Izvestiya, local companies have reported that 98% of Chinese regional banks do not process yuan-based transactions from Russia.

This scheme had been used during May and June to streamline money flows from Russia to China, but it has now been disarmed likely due to the fear of secondary sanctions targeting these institutions. Ekaterina Kizevich, general director of Atvira, a company managing Chinese imports, told Izvestia that she received a letter from its bank informing them of the payments’ suspension on July 20.

Now, Russian companies have to jump through hoops to continue their bilateral trade relations with Chinese counterparts. One of the solutions proposed for this issue is to route these payments using a Russian credit institution branch in China. However, this elevates the payments’ costs up to 5% given the complexities of this trade.

Barter trade has been considered, even with the complexity of this kind of transaction. However, not all products allow this settlement scheme.

Amid this troubling panorama, cryptocurrency is an option to keep trade flowing between these countries, providing independent and neutral payment rails for companies. There have been reports about Russian metal producers using stablecoins to pay and receive payments from Chinese suppliers since June.

Nonetheless, with the recent approval of a law regulating this kind of payment, its usage might grow as an answer to an increasing possibility of enacting more sanctions to isolate Russia from conducting trade settlements with third parties.

By Sergio Goschenko | Original LINK