Russian legislators recently approved a measure permitting businesses to engage in transnational trade using cryptocurrencies. This move aims to bypass Western sanctions instituted after Russia invaded Ukraine.
The legislation, expected to be enacted in September, has the support of Elvira Nabiullina, the governor of Russia’s central bank, who stated that the very first crypto transactions under the new law would take place before the year’s end. Russia has experienced substantial delays in transnational payments with key trading partners such as the UAE, China and India, as banks within those countries, influenced by Western regulators, adopt a more cautious stance.
In a speech to lawmakers, Anatoly Aksakov, leader of the Duma’s lower house in parliament, stated, “We are making a historic decision in the financial sector.”
This new law authorizes the country’s central bank to establish an “experimental” framework for crypto payments. The specifics of this framework have not yet been disclosed. The measure is a portion of a larger set of laws that also cover regulations on crypto mining as well as the management of other virtual assets. However, it will not suspend the current ban on crypto payments inside Russia.
According to the country’s central bank, the Russian economy has been severely hampered by payment delays, which have triggered an 8% drop in imports in Q2 this year. Despite the country’s attempts to shift to currencies used by its trading partners and create an alternative system of payments for the BRICS bloc of rising economies, a significant number of transactions are still completed in euros and dollars via the global SWIFT system. Because of this, banks in nations that trade with Russia run a secondary sanctions risk, which makes them tighten up on compliance.
Nabiullina stated that the likelihood of these secondary sanctions has grown, making import payments more difficult and impacting a wide variety of products. Further, she noted that delays in payment have caused supply chains to be longer and prices to be higher.
Russia’s embrace of cryptocurrencies, according to Quantum Economics CEO Mati Greenspan, makes sense because crypto transactions cannot be blocked or censored by banks or governments. “In the past, Russia was reluctant to let its citizens have this kind of transactional independence. But now that Bitcoin is so widely utilized in regular business, there would be too great an opportunity cost to prohibit its use,” he continued.
Over the last year, the price of Bitcoin has more than doubled due to the halving event and the approval of Bitcoin spot ETFs. Currently, Bitcoin is valued at $66,000, reflecting a 120% increase over the last year.
This new development in Russia is likely to be closely watched by major exchanges such as Coinbase Global Inc. (NASDAQ: COIN) because it could open up opportunities, despite the ban on making crypto payments inside the country.
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