Illustrative image of two commemorative bitcoins, seen in front of the national flag of Russia, displayed on a computer screen.
Arthur Widak | Nurfoto | Getty Images
Russian lawmakers on Tuesday approved a new law allowing the use of cryptocurrency for international payments, as the country faces continued financial pressure from Western sanctions.
The State Duma, the lower house of the Russian parliament, gave the first green light on Tuesday to the new legislation, which would allow companies to use cryptocurrencies for cross-border trade, local media reported.
“We are making a historic decision in the financial field,” Anatoly Aksakov, the head of the State Duma, told lawmakers on Tuesday, according to news agency Reuters.
Mati Greenspan, CEO of crypto market research firm Quantum Economics, said Russia’s move toward crypto made sense because bitcoin transactions “cannot be censored or blocked by any government or bank.”
“Previously, Russia would not want to allow this kind of transactional freedom to its citizens – but now we are at the point where bitcoin is so widely used in everyday commerce that the opportunity cost for them not to allow it is simply too great are. ,” he added.
Bitcoin prices have more than doubled in the past year amid optimism over the approval of the first US spot bitcoin – and, more recently, ether – exchange traded funds, as well as the so-called halving event that reduces the supply of newly issued tokens.
According to CoinGecko data, the world’s largest digital coin is currently worth $66,000, up more than 120% in the past twelve months.
Under pressure from sanctions
Rising tensions between Russia and the US and its allies have led to numerous sanctions against individuals and entities in Russia in retaliation for the attack on Ukraine.
The US, European Union and Britain are among the jurisdictions that have imposed sanctions on Russia following its invasion of Ukraine in February 2022. They have continued to increase pressure on the country, targeting President Vladimir Putin, Russia’s financial sector and countless oligarchs.
In addition to passing legislation that will allow Russian companies to transact internationally via crypto, Russia’s central bank will also be allowed to move money abroad using private digital currencies.
Elvira Nabiullina, the governor of Russia’s central bank, said on Tuesday that crypto-based payments would take place before the end of 2024.
“We are already discussing the terms of the experiment with ministries and departments, with companies, and we expect that the first such payments will be made before the end of this year,” she said.
The central bank’s commitment to using crypto as a method for cross-border payments marks a reversal from the regulator’s previous position on the technology.
In January 2022, Russia’s central bank proposed banning the use of crypto for transactions, as well as digital currency mining, citing threats to financial stability, the well-being of citizens and the sovereignty of monetary policy.
In addition, Russia is also exploring the implementation of a digital version of the ruble. Central bank Governor Nabiullina said on Tuesday that the regulator will try to move from a pilot phase to a mass implementation of the digital ruble from July 2025, Russian news agency Interfax reported.
Central bank digital currencies, or CBDCs, are different from crypto. unlike bitcoin and other cryptocurrencies, for which there is no central authority, CBDCs are issued directly by a government and are designed to replicate fiat currencies in the form of a digital token.
Can crypto help countries avoid sanctions?
Quantum Economics’ Greenspan said Russia’s move to accept crypto “makes perfect sense from a global trade perspective.”
This will, he added, “help the Russians open cross-border payments with countries and companies that would otherwise be closed to them due to US sanctions.”
Other sanctioned countries have often tried to circumvent such financial barriers through the use of cryptocurrencies. For example, North Korea has been accused several times of raising millions of dollars in cryptocurrency to help fund various state programs and evade foreign sanctions.
North Korean state-backed hacking group Lazarus was behind a massive heist on the Ronin Network – a blockchain that powers a popular non-fungible token (NFT) game called Axie Infinity. The hack allowed cybercriminals to make off with more than $600 million in digital tokens, blockchain analytics firms Elliptic and Chainalysis previously said.
Iran is also accused of it exploiting digital currencies to circumvent international trade barriers.
Proponents of cryptocurrencies, on the other hand, also argue that the digital asset is a useful tool to combat illegal activities. That’s because the networks underlying them, called blockchains, are public and provide a historical record of transactions that is cryptographically secure and cannot be changed.