Illustrative image of two commemorative bitcoins displayed in front of the national flag of Russia displayed on a computer screen.
Artur Widak | Nurphoto | Getty Images
Russian lawmakers on Tuesday approved a new law allowing the use of cryptocurrencies for international payments as the country faces continued economic pressure from Western sanctions.
The State Duma, which is the lower house of the Russian parliament, on Tuesday gave the initial green light to new legislation that will allow businesses to use cryptocurrencies for cross-border trade, local media reported.
“We are taking a historic decision in the financial sector,” Duma head Anatoly Akshakov told lawmakers on Tuesday, according to a Reuters news agency report.
Russia’s central bank is also looking to move money across borders using crypto, with its head saying crypto-based payments will take place before the end of 2024.
“We are already discussing the terms of the experiment with ministries and agencies, with businesses, and we expect the first such payments to be made before the end of this year,” he said.
The Russian Embassy in London was not immediately available to comment on the country’s plans to adopt pro-cryptocurrency legislation when contacted by CNBC on Tuesday.
The central bank’s commitment to using crypto as a cross-border payment method marks a reversal from the regulator’s previous stance on the technology.
In January 2022, the Russian central bank proposed to ban the use of crypto for transactions, as well as the mining of digital currencies, citing threats to financial stability, citizens’ well-being and the sovereignty of monetary policy.
Under the pressure of sanctions
It comes as rising tensions between Russia and the US and its allies have led to countless sanctions on individuals and entities in Russia in retaliation for its attack on Ukraine.
The US, European Union and Britain are among the jurisdictions that have imposed sanctions on Russia following its invasion of Ukraine in February 2022. They have continued to increase pressure on the country, targeting President Vladimir Putin, Russia’s financial sector and countless oligarchs.
Separately, Russia is also exploring the implementation of a digital version of the ruble.
Central bank digital currencies, or CBDCs, are different from cryptocurrencies. Different bitcoin and other cryptocurrencies, which have no central authority to govern them, CBDCs are issued directly by a government and are designed to replicate fiat currencies in the form of a digital token.
Central Bank Governor Nabiullina said on Tuesday that the regulator will try to move away from a pilot phase towards mass implementation of the digital ruble from July 2025, Russian news agency Interfax reported.
Can Crypto Help Countries Avoid Sanctions?
Other sanctioned countries have often tried to circumvent such financial restrictions through the use of cryptocurrencies.
North Korea has been accused on numerous occasions of amassing millions of dollars in cryptocurrency to help fund various government programs and evade foreign sanctions.
The state-backed hacking group Lazarus was behind a massive heist Ronin Network — a blockchain that supports a popular non-fungible token (NFT) game called Axie Infinity. According to blockchain analytics firms Elliptic and Chainalysis, the hack led to cybercriminals winning over $600 million worth of digital tokens.
Proponents of cryptocurrencies, on the other hand, also claim that digital assets are a useful tool to counter illegal activities. This is because the networks that support them, called blockchains, are public and display a historical record of transactions that is cryptographically secure and cannot be changed.