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Russia may turn to cryptocurrencies as the latest way to circumvent tough international sanctions that are battering its economy as the war in Ukraine continues.
“We are taking a historic decision in the financial sector,” State Duma Speaker Anatoly Aksakov told lawmakers. According to ReutersThe House passed the bill after three readings on Tuesday.
The United States and its Western allies imposed tough sanctions following Russia’s invasion of Ukraine, including the extreme decision to cut off some Russian banks’ access to the SWIFT banking system.
Russia has since tried to circumvent the sanctions by using the currencies of its trading partners, including through complex remittance schemes, but the world’s heavy reliance on the dollar and euro has hampered those efforts, forcing Moscow to explore alternatives such as digital currencies.
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Russian President Vladimir Putin speaks during a conference at the Senezh School of Business in Solnechnogorsk, Russia, June 14, 2024. (Contributor/Getty Images/Getty Images)
The bill is expected to be presented to the Federal Senate before Russian President Vladimir Putin gives final approval. The new measures would help regulate mining, which is already taking place across Russia, one of the world’s largest crypto-mining countries.
Putin has previously tried to restrict crypto mining in Russia, concerned about the huge demand it places on the power grid, but the country’s cool temperatures and cheap electricity have made it a magnet for people interested in mining.
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Russian State Duma members and other participants listen to President Vladimir Putin’s inauguration speech in Alexandrovsky Hall of the Grand Kremlin Palace on May 7, 2024 in Moscow, Russia. (Contributor/Getty Images)
“Previously, there were concerns that legalizing cryptocurrencies could create problems for the development of the domestic market,” Aksasov said in the call. Interview with BloombergHe argued that cryptocurrencies continue to grow and “cannot be ignored.”
The new bill achieves this by limiting large-scale mining to companies on a government-approved list and by requiring them to provide transaction data. Barron’s reportedRussia’s central bank claims that its government-backed plans for a “digital ruble” will use the new regulations to bolster the country’s economic infrastructure.
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Elvira Nabiullina, Governor of the Central Bank of Russia, spoke in an interview in Moscow, Russia on June 27, 2019. (REUTERS/Evgenia Novozhenina // File Photo/Reuters)
The law goes into effect in September. While cryptocurrencies will remain invalid for payments within Russia, it will allow the Kremlin to expedite delayed payments with major trading partners such as China, India and the UAE.
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Elvira Nabiullina, governor of the Bank of Russia, said that Russia’s first official cryptocurrency exchange will take place before the end of the year. According to Bitcoin Magazine:Late payments have caused Russian imports to fall by 8% this year.
“The risk of secondary sanctions is increasing,” Nabiullina said. “Sanctions will make it harder to pay for imports and will affect a wide range of products.”
