With the US threatening to impose secondary sanctions on international banks, Russian businesses are facing increasing payment pressure.
Russia is taking steps to control the usage of cryptocurrency as businesses struggle with more challenging international payments due to the possibility of US sanctions related to the conflict in Ukraine.
On Tuesday, members of the State Duma, the lower house of parliament, approved a bill pertaining to cryptocurrencies along with other laws governing cryptocurrency mining. In what lawmakers have referred to as an experiment, the measure seeks to allow cross-border cryptocurrency payments under central bank supervision.
Anatoly Aksakov, the head of the Duma’s financial market committee, predicts that the draft regulations will be quickly approved by senators in the Federation Council and signed into law by President Vladimir Putin to take effect on September 1.
In a phone interview, Aksakov stated, “Previously, there were fears that the legalization of cryptocurrency could create problems for the development of the domestic market.” According to him, the use of cryptocurrencies is “an objective phenomenon and cannot be ignored” by regulation, even though they might help Russia get over Western sanctions.
With the US threatening to impose secondary sanctions on international banks, Russian businesses are facing increasing payment pressure. This action represents a swift shift in the country’s stance toward digital instruments. Putin urged the government this month to “not miss the moment” in regulating the technology both domestically and in international transactions, despite the fact that using digital currency for payments is presently illegal in Russia.
Putin informed officials that cryptocurrencies “are increasingly used in the world as a means of payment in international settlements.”
The central bank suggested a complete prohibition on the usage and creation of cryptocurrencies as recently as January 2022, just weeks before Russia launched its full-scale invasion of Ukraine, claiming that they presented serious hazards to economic security and financial stability.
By year’s end, the bank loosened its stance and began to encourage cryptocurrency mining and experimentation with cross-border transactions. Nevertheless, it recommended Russian financial institutions to refrain from promoting their digital currency-related services.
Elvira Nabiullina, governor of the Bank of Russia, told the Federation Council on Tuesday that “we are ready to be flexible in external settlements.” According to her, local businesses should begin accepting bitcoin payments internationally “before the end of this year,” operating under what she described as “an experimental regime.”
When asked for a statement regarding the shift in its stance, the Bank of Russia remained silent. Last month, First Deputy Governor Vladimir Chistyukhin stated that the nation has to take into account every option for getting around obstacles with foreign payments, even ones “that seemed unpopular to us yesterday.”
While some exporters already utilize cryptocurrencies to make international payments, these transactions currently go via middlemen in other nations.
According to Aksakov, the law will control cryptocurrencies in Russia in a manner similar to that of foreign exchange. Companies engaged in cryptocurrency and mining have been pushing for legislation that would allow them to operate “within regular legal frameworks” and not be afraid of government probes, he said.
Ani Aslanyan, an analyst who manages a Telegram group devoted to cryptocurrencies, stated that the government is hurrying through the law because they believe cryptocurrencies would enhance cross-border payments. But the US will probably keep an eye on the businesses and services that Russia uses to attempt to thwart them, starting a race ahead of penalties.
Aslanyan also stated that only major exporters are likely to achieve the requirements outlined in the rules, turning cryptocurrency payments into a kind of “closed club” that is inaccessible to small and medium-sized enterprises. For instance, she added that only individuals who have mined cryptocurrency themselves – currently, only major corporations in Russia – will be able to complete transactions.
According to the bill, the Federal Property Management Agency, Federal Tax Service, Federal Security Service, and Federal Financial Monitoring Service will all have responsibilities in managing the turnover of Bitcoin, with the Bank of Russia serving as the regulator on matters pertaining to cryptocurrencies.