Russia Legalizes Crypto Mining and Payments Amid Sanctions
In response to Western sanctions, Russia has enacted legislation legalizing cryptocurrency mining and international payments, a strategic pivot aimed at mitigating economic pressures.
Russia Legalizes Crypto Mining and Payments Amid Sanctions
In response to mounting financial pressures from Western sanctions, Russia has enacted significant legislation legalizing cryptocurrency mining and permitting the use of cryptocurrency for international payments. The bills were signed into law on August 8th by President Vladimir Putin, with crypto payment trials slated to start this month, according to a Bloomberg report.
This legislative shift marks a significant departure from the government's previous stance, where the Central Bank of Russia (CBR) had pushed for a complete ban on cryptocurrencies as recently as 2022. The new laws, set to take effect in September for cross-border payments and November for crypto mining, will enable Russian businesses to engage in international trade using cryptocurrencies and authorize approved entities to mine digital assets.
Putin has called on Russia “not to miss the moment” in regulating cryptocurrencies, emphasizing their growing role in global payments and potential to reduce reliance on the U.S. dollar. Key officials, including bill author Anton Gorelkin and CBR Governor Elvira Nabiullina, have specifically acknowledged that this legislative change is aimed at mitigating the impact of sanctions and facilitating international payments.
Russia’s Evolving Attitude Towards Cryptocurrency
Despite the recent legislation, Russia’s ban on using cryptocurrencies for domestic payments remains in place. Nevertheless, this has not dampened the widespread use of cryptocurrency within the country. In fact, Russia consistently ranks among the top countries in the Global Crypto Adoption Index, consistent with the observation that blanket bans on cryptocurrency are often ineffective, as they do not significantly curb usage but rather push it into informal or less regulated channels.
Concurrently, crypto-linked banking services have also been on the rise in Russia prior to the recent legislation. Rosbank, owned by Russian billionaire Vladimir Potanin, paved the way for cross-border cryptocurrency payments for businesses in June of last year, according to Vedomosti, with several other banks subsequently introducing similar services.
Sanctions Evasion Through Cross-Border Payments
The CBR is spearheading the initiative to integrate cryptocurrency into Russia’s financial system for cross-border payments, creating an experimental infrastructure that allows approved Russian businesses and entities to use digital currencies for international trade. Approved mining entities will also be allowed to use crypto to settle trades, according to official statements.
These recent crypto-forward legislative efforts are part of Russia’s broader efforts to develop alternative payment mechanisms to alleviate Western sanctions pressure while decreasing dependence on the U.S. dollar, which has been a long-term goal for Russia especially amidst increasing geopolitical tensions.
The Central Bank of Russia: New Scope of Regulatory Power
The new legislation consolidates the CBR’s control over cryptocurrency within Russia, enabling it to regulate and monitor these transactions closely. While the CBR is still testing its central bank digital currency (CBDC) with the digital ruble projected to launch in 2025, this legislation allows the use of existing cryptocurrencies with central bank oversight.
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