The largest bank in China has decided to cease cooperation with the Moscow Exchange due to sanctions

One of China’s largest state banks, Bank of China, has ceased its operations with the Moscow Exchange due to U.S. sanctions imposed on the exchange. The bank, which previously acted as a clearing bank for yuan transactions on the exchange, stopped these activities on July 15. This move follows the inclusion of the Moscow Exchange in the U.S. sanctions list.

Currently, another Chinese bank, ICBC Bank, handles all yuan transactions. However, its operations are also at risk, as the U.S. Treasury’s license allowing transactions with the sanctioned exchange is valid only until mid-August. After this period, Chinese banks may face sanctions, potentially halting yuan trading in Russia.

On June 12, the U.S. imposed sanctions on the Moscow Exchange and its key structures. The next day, the exchange stopped trading in U.S. dollars, euros, and Hong Kong dollars. In the following weeks, issues with yuan transactions also emerged.

Following Bank of China’s exit, difficulties with yuan withdrawals have been reported by brokerage company Sinara and Sberbank CIB. Yuan trading volumes on the Moscow Exchange have sharply decreased: in July, the average daily volume was 88 billion rubles, a third lower than in June and half of January’s figures.

Trading in other “friendly” currencies has also declined. For example, trading volume in Turkish lira has reduced to 20-30 million rubles per day, with major broker BCS temporarily halting lira operations on the exchange.

According to the Central Bank of Russia, the country’s currency market is now predominantly focused on the exchange of yuan for rubles, with the yuan’s share reaching 99.6%. The Central Bank is considering halting yuan trading due to concerns about a complete cessation of cooperation with Chinese banks due to U.S. sanctions threats.

Central Bank Governor Elvira Nabiullina stated on July 4 that the regulator is considering the risks of halting yuan trading and is noting complications with cross-border payments. Since the beginning of the year, foreign banks, including those from "friendly" countries, have been increasingly blocking transactions with Russia.