Russia Legalizes Cryptocurrencies for International Payments

In a move aimed at circumventing Western sanctions, Russian lawmakers have approved a bill to legalize the use of cryptocurrencies for international settlements. According to Reuters, this new law is set to take effect in September, with the first cryptocurrency transactions expected by the end of the year.

The Russian economy has faced significant challenges in handling international transactions since the conflict in Ukraine began in January 2022. Western financial sanctions have created hurdles for Russian businesses, complicating their transactions with key trading partners like China, India, and Turkey.

Anatoly Aksakov, head of the Duma’s financial market committee, explained to Bloomberg that under the new legislation, cryptocurrencies in Russia will be regulated in the same manner as foreign currencies, such as the U.S. dollar.

Shifting Policies on Cryptocurrency Use

Russia’s stance on using cryptocurrencies for international payments has been inconsistent since the conflict’s onset. Initially, the country imposed a comprehensive ban on crypto payments. However, it later permitted financial service firms to experiment with crypto for specific use cases.

Other heavily sanctioned countries, such as Venezuela, have already adopted cryptocurrencies for their international settlements. This move aligns Russia with those nations, leveraging digital currencies to bypass economic restrictions.

Crypto analyst Ani Aslanyan predicts that participation in crypto transactions will be mostly confined to large and medium-sized companies due to the stringent requirements of the new legislation. Many firms have already faced penalties for assisting Russian banks in using crypto. For example, Lithuania recently fined the crypto firm Payeer 9.3 million Euros for enabling Russian clients to transfer funds to Russian banks under EU sanctions.

Before the bill’s passage, Aslanyan noted that countries like the U.S. are likely to increase their scrutiny of Russian crypto activities in response to the new law.

Search for Payment Solutions

Russian officials have been vocal about the necessity of finding innovative solutions to the nation’s payment issues. Elvira Nabiullina, the governor of the Russian central bank, has expressed her expectation that international payment systems, independent of Western institutions, will eventually be developed as a response to ongoing sanctions.