July 19, 2024
By Sharan Kaur Phillora
Russia is considering the use of cryptocurrencies for international payments, a move that could reshape its economic landscape amid ongoing Western sanctions. The Russian Ministry of Finance has proposed legislation that would allow digital currency trading on licensed exchanges, such as the Moscow Exchange, to facilitate cross-border transactions.
Here’s what we know:
According to media reports, the proposal comes as Russia grapples with the economic impact of sanctions imposed by Western nations following its invasion of Ukraine. These sanctions have complicated foreign transactions with key trading partners, including China, India, the UAE, and Turkey. The new legislation, set for review in the Russian parliament on July 23, aims to mitigate these challenges by legalizing cryptocurrency transactions for international payments.
Yuri Chekhanchin, head of Russia’s anti-money-laundering watchdog, emphasized the necessity of this move for businesses affected by sanctions. “This is a need for businesses, especially in cases involving sanction mechanisms, when they need to enter the international market, and it can’t always be resolved through standard methods,” Chekhanchin stated.
However, the proposal has met with caution from various quarters. The Central Bank of Russia has historically opposed the use of cryptocurrencies within the country, citing risks such as money laundering and financial instability. Elvira Nabiullina, head of the Central Bank, suggested creating special organizations to mine and use crypto for international settlements, initially limiting this capability to state-affiliated entities.
President Vladimir Putin, during a recent government meeting, praised the experimental launch of the digital rouble, a central bank digital currency (CBDC) based on blockchain technology. However, he also highlighted concerns about the high energy consumption of cryptocurrency mining farms, particularly in Siberia, where cheap electricity has spurred the growth of such operations. Putin advocated for regulatory provisions to manage the energy usage and taxation of these mining farms.
Despite the potential benefits, the move to embrace crypto for international payments is fraught with risks. U.S. senators have raised concerns about countries like Venezuela using cryptocurrencies to evade sanctions, a scenario that could apply to Russia as well. Chekhanchin assured that his agency would monitor and prevent illegal transactions under the new framework.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.
