Key Takeaways:
- Russia approves new law allowing the use of cryptocurrencies for cross-border trade
- The law, expected to take full effect on September 1, 2024, permits businesses to use cryptocurrencies for international payments
Russian lawmakers have approved new legislation permitting the use of cryptocurrency for international payments. This decision, made by the State Duma, the lower house of the Russian Parliament, comes as Russia seeks to navigate the ongoing financial pressures imposed by Western sanctions.
The legislation aims to leverage cryptocurrencies’ potential to facilitate cross-border trade and mitigate the impact of regulatory restrictions.
The State Duma gave the initial green light to the new law on Tuesday. According to Anatoly Aksakov, head of the Duma’s financial market committee, these draft laws are expected to pass quickly through the Federation Council and be signed into law by President Vladimir Putin, with an effective date set for September 1, 2024.
“Previously, there were fears that the legalization of cryptocurrency could create problems for the development of the domestic market,” Aksakov stated.
However, he emphasized that the potential of cryptocurrencies to help Russia bypass Western sanctions has become “an objective phenomenon and cannot be ignored” by regulation.
This legislative shift reflects Russia’s strategic response to the increasing difficulty in facilitating foreign financial payment services among major trading institutions due to regulatory pressure and sanctions from the United States.
The regulatory revision will also extend to the crypto mining sector, which the government previously opposed due to potential electricity concerns. Despite this positive shift from a once-anti-crypto stance, the new law will not lift the existing ban on cryptocurrency use within Russia’s domestic market.
Cryptocurrencies remain prohibited for internal payments, focusing instead on cross-border trade applications.
The central bank highlighted that delays in payments have become a significant challenge for the Russian economy. “The risks of secondary sanctions have grown. They make payments for imports difficult, and that concerns a wide range of goods,” said Elvira Nabiullina, Governor of the Bank of Russia.
She noted that businesses are managing to find solutions, but the difficulties are leading to longer supply chains and rising costs.
Critics and analysts believe that Russia’s move to accept crypto for international payments “makes total sense from a global trade perspective.”
This legislative change will, according to experts, “help the Russians open up cross-border payments with countries and businesses that would otherwise be closed to them due to U.S. sanctions.“
Russia is not the first sanctioned country to turn to cryptocurrencies as a means to circumvent financial curbs. North Korea, for example, has been accused on multiple occasions of raising millions of dollars in crypto to fund various state programs and evade foreign sanctions.
