Belarus Turns to Crypto to Bypass Sanctions and Rebuild Trade

Belarus has accelerated its efforts to integrate cryptocurrency into its financial infrastructure in response to economic pressure from Western sanctions. President Alexander Lukashenko has directly instructed the banking sector to expand the use of digital currencies, emphasizing their role in stabilizing the national economy amid declining exports and financial isolation. In a recent meeting with central and commercial bank officials, Lukashenko underscored the importance of leveraging blockchain-based transactions, stating that cryptocurrency could play a pivotal role in maintaining economic activity in the face of restrictions.

Lukashenko’s directive aligns with recent legislative moves to regulate the crypto market. In March, he mandated the development of a national cryptocurrency mining industry due to the country's surplus energy resources. Later, in the summer of 2023, authorities reportedly began drafting rules to prohibit peer-to-peer transactions involving cryptocurrencies like Bitcoin. However, Belarus has maintained a relatively open stance toward digital assets since legalizing their use in 2018. This includes allowing for the sale, exchange, and mining of crypto within the country.

According to official projections, crypto-based transactions in Belarus have already shown substantial growth. In the first seven months of 2024, the volume of external payments through crypto exchanges reached $1.7 billion. This figure is expected to rise to $3 billion by the end of the year, according to estimates provided by state agencies. The country’s leading exchanges, including Binance, OKX, and KuCoin, have been central to this expansion, with Lukashenko reporting that they are on track to double their transaction volumes. Additionally, the number of crypto users in Belarus is projected to reach over 855,000 by 2026, representing a user penetration rate of nearly 9.6%.

Beyond cryptocurrency, Lukashenko has also prioritized the development of digital payment systems as part of the broader economic modernization strategy. He has instructed banks to implement QR-based payment systems and establish an instant payment infrastructure by year-end. VTB Bank Belarus, a subsidiary of the Russian majority-owned VTB Bank, has already introduced QR code-based transactions linked to the ERIP online payment system. The government also plans to enhance digital infrastructure through the adoption of biometric technologies, AI-driven solutions, and the creation of a domestic IT firm to reduce reliance on foreign software providers.

Lukashenko emphasized that digital transformation must yield concrete economic results, rather than serve as an abstract goal. This pragmatic approach reflects the urgency of maintaining financial activity under the constraints of sanctions. While the government has not provided detailed metrics on the impact of these measures, the focus on expanding both crypto and digital payment systems signals a strategic shift in Belarus’s economic policy. This strategy could enhance the resilience of the country’s financial system and provide alternative channels for international trade and payments.