Russian lawmakers passed a bill on Tuesday, July 30 allowing businesses to use cryptocurrencies in international trade, a move aimed at circumventing Western sanctions imposed following Russia’s invasion of Ukraine.
Local media reported that the State Duma, Russia’s lower house of parliament, gave initial approval to the legislation, which will allow businesses to use cryptocurrencies for cross-border trade.
Russia Legalizes Cryptocurrency for International Trade
According to a report by Retuers, Russian lawmakers passed a new law on Tuesday, permitting the use of cryptocurrency for international trades by specific businesses as the country grapples with ongoing financial pressure from Western sanctions.
The new law, expected to come into effect in September, has garnered support from Russian Central Bank Governor Elvira Nabiullina, who stated that the first cryptocurrency transactions will occur before the end of the year.
Since the invasion, Russia has experienced significant delays in international payments with key trading partners such as China, India, and the United Arab Emirates. These delays stem from banks in these countries becoming more cautious under pressure from Western regulators.
“We are taking a historic decision in the financial sphere,” Anatoly Aksakov, head of the Duma lower house of parliament, told lawmakers.
The new law mandates the central bank to create an “experimental” infrastructure for cryptocurrency payments, although specific details of this infrastructure have yet to be announced.
The legislation is part of a broader package that includes regulations on cryptocurrency mining and the circulation of other digital assets. However, it will not lift Russia’s existing ban on cryptocurrency payments.
🚨 Russia’s Crypto Mining ‘Legalization’ Bills Could Be Approved ‘This Week’
Russia may legalize industrial crypto mining by the end of the week, media outlets in the nation have claimed.#CryptoNews #Russiahttps://t.co/RwCqoZzf8R
— Cryptonews.com (@cryptonews) July 24, 2024
Notably, payment delays have significantly impacted the Russian economy, according to the central bank, contributing to an 8% decline in Russian imports in the second quarter of 2024.
Despite efforts to switch to the currencies of its trade partners and develop an alternative payment system within the BRICS group of emerging economies, many transactions are still conducted in dollars and euros through the international SWIFT system.
This exposure subjects banks in countries trading with Russia to the risk of secondary sanctions, compelling them to tighten compliance procedures.
“The risks of secondary sanctions have grown. They make payments for imports difficult, and that concerns a wide range of goods,” Nabiullina said, highlighting that payment delays have resulted in longer supply chains and rising costs.
Russia to Implement Crypto-Based International Payments Amid Intensifying Western Sanctions
Mati Greenspan, CEO of crypto market research firm Quantum Economics, commented that Russia’s move to embrace crypto was logical since bitcoin transactions “cannot be censored or blocked by any government or bank.”
He added, “Previously, Russia would not want to allow that kind of transactional freedom to its citizens — but now we’re at the point that Bitcoin is used so often in everyday commerce that the opportunity cost for them not to allow it is simply too great.”
The escalating tensions between Russia and Western nations, including the U.S. and its allies, have resulted in numerous sanctions against Russian individuals and entities.
These sanctions are a response to Russia’s invasion of Ukraine in February 2022. The U.S., European Union, and Britain have continued to intensify pressure on Russia, targeting President Vladimir Putin, the Russian financial sector, and numerous oligarchs.
The newly passed legislation not only allows Russian firms to transact internationally via crypto but also grants the Russian central bank permission to use private digital currencies for overseas transactions.
Elvira Nabiullina, the Russian central bank governor, announced that crypto-based payments would begin before the end of 2024.
“We are already discussing the terms of the experiment with ministries and departments, with businesses, and we expect that the first such payments will take place before the end of this year,” she said.
This move represents a significant shift from the central bank’s previous stance on cryptocurrency. In January 2022, the Russian central bank proposed banning the use of crypto for transactions and the mining of digital currencies, citing threats to financial stability, citizens’ well-being, and monetary policy sovereignty.
