The Russian central bank has been rethinking the approach to regulating crypto and agreed with the finance ministry to legalise crypto for cross-border payments.
Deputy finance minister Alexei Moiseev said in an interview with Russia-24 TV channel that the Bank of Russia and the finance ministry expect to legitimise cross-border payments in crypto soon.
Moiseev outlined the importance of enabling local crypto services in Russia, noting that many Russians rely on foreign platforms to open a crypto wallet. He said that the necessity for doing it in Russia comes from the assurance that the involving entities will be supervised by the central bank, being therefore obliged to comply with anti-money laundering (AML) and Know Your Customer (KYC) regulations.
The Bank of Russia subsequently clarified that it is still opposed to legalising crypto payments within the country despite giving the green light to cross-border payments.
The Russian Prime Minister, Mikhail Mishustin has also called for joint efforts of the government and the Bank of Russia to develop tools that meet the challenges of the new time.
The idea of crypto payments for national trades in Russia surfaced in late 2021. Then, Russian President Vladimir Putin said it was still premature to use crypto for trades of energy resources like oil and gas.
The situation has apparently changed amid Western economic sanctions following Russia’s invasion of Ukraine. In May 2022, the Minister of Industry and Trade declared that Russia would legalise crypto payments sooner or later. Bank of Russia governor Elvira Nabiullina also later suggested that crypto can be used for cross-border payments, but only if crypto doesn’t get into Russia’s domestic financial system.
Russian lawmakers have been opposed to the idea of using cryptocurrencies as a payment method. In 2020, Russia adopted a major crypto law, ‘On Digital Financial Assets,’ which officially prohibited the use of cryptocurrencies like Bitcoin (BTC) for payment purposes. The Bank of Russia has been sceptical about the idea of cryptocurrency payments because it wanted to protect the Russian ruble as the only legal tender in the country.
In the context of Russia’s invasion of Ukraine, crypto proponents argued that crypto helps undermine Moscow’s authoritarian regime by providing an alternative to the Russian ruble.
Proponents argue that crypto provides average Russians and Ukrainians a store of value and medium of exchange that could reduce the humanitarian costs of the sanctions and war. They also highlight crypto as an important medium for donations to the Ukrainian government that complements Western aid. However, some sceptics view the decentralized and underregulated nature of crypto as a vehicle for illicit transactions, including as a means for Russian individuals and entities to bypass sanctions.
Even if in theory crypto can be leveraged for illicit purposes such as evading sanctions, in practice there are technological barriers, market structures, and limited liquidity that make it difficult for the sanctioned Russian actors to evade sanctions at scale using crypto. While the U.S. Treasury Department is monitoring whether crypto is being used to evade sanctions, a National Security Council official reportedly said that crypto is an ineffective tool for sanctions evasion.
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