Russia Legalizes Crypto Mining and Cross-Border Payments Amidst Western Sanctions
In a historic move, Russia’s State Duma, the lower house of the Federal Assembly, has passed two pivotal crypto-related laws, as confirmed by a Russia-based policy expert to CoinDesk and reported by Ria Novosti, the state-owned news agency. These new legislations, set to transform the landscape of cryptocurrency in Russia, come as the nation grapples with stringent Western sanctions.
The first law, effective November 1, 2024, fully legalizes cryptocurrency mining in Russia. It allows legal entities and individual entrepreneurs registered with the Ministry of Digital Development to engage in mining activities. Those not registered can only operate mining rigs within specified energy consumption limits. Oversight of mining activities will be distributed among various institutions, with the Bank of Russia holding overriding powers. Additionally, miners must report their digital currency yields to a government-authorized body, and the central bank, along with the authorized body, can impose bans or restrictions on digital currency transactions to maintain monetary stability.
This law also enforces a ban on advertising cryptocurrencies and offering them to an unlimited audience, marking a cautious approach to widespread crypto adoption.
The second law, which takes effect on September 1, 2024, introduces a special experimental regime, granting the Bank of Russia authority to permit authorized companies to conduct cross-border settlements and exchange trading in digital currency. This regime allows companies, exchanges, and crypto entities to apply to the central bank for participation. The experimental regime will enable the use of cryptocurrency for foreign trade settlements, exchange trading in cryptocurrency, and the creation of an electronic platform for crypto operations based on the National Payment System (NPS).
Anatoly Aksakov, head of the Duma, described the legislation as a “historic decision in the financial sphere,” as reported by Reuters.
Mati Greenspan, CEO of Quantum Economics, highlighted the strategic shift in Russia’s stance towards cryptocurrencies. “Russia warming to crypto makes sense as bitcoin transactions cannot be censored or blocked by any government or bank,” he said. “Previously, Russia would not want to allow that kind of transactional freedom to its citizens — but now we’re at the point that bitcoin is used so often in everyday commerce that the opportunity cost for them not to allow it is simply too great.”
The legislative shift comes against the backdrop of heightened tensions between Russia and the West. Following Russia’s invasion of Ukraine in February 2022, the U.S., European Union, and Britain imposed numerous sanctions targeting Russia’s financial sector and key individuals. In this context, the new laws appear to be a strategic response, aiming to bypass financial restrictions and facilitate international trade through cryptocurrencies.
Elvira Nabiullina, the Russian central bank governor, announced that crypto-based payments would commence before the end of 2024. “We are already discussing the terms of the experiment with ministries and departments, with businesses, and we expect that the first such payments will take place before the end of this year,” she stated.
This move marks a significant reversal from the central bank’s previous stance. In January 2022, it proposed banning crypto transactions and mining, citing threats to financial stability and monetary policy sovereignty.
In addition to these crypto-friendly laws, Russia is exploring the implementation of a digital ruble. Nabiullina indicated plans to transition from the pilot phase to mass implementation of the digital ruble by July 2025, as reported by Interfax.
Central Bank Digital Currencies (CBDCs), like the proposed digital ruble, differ from cryptocurrencies such as Bitcoin. While cryptocurrencies operate without a central authority, CBDCs are government-issued digital tokens designed to replicate fiat currencies.
Greenspan emphasized the global trade benefits of Russia’s crypto adoption. “This will help the Russians open up cross-border payments with countries and businesses that would otherwise be closed to them due to U.S. sanctions,” he noted.
Other sanctioned nations, including North Korea and Iran, have similarly turned to cryptocurrencies to evade international trade barriers. For instance, North Korea’s state-backed hacking group Lazarus executed a massive $600 million heist on the Ronin Network, a blockchain supporting the NFT game Axie Infinity.
Proponents argue that despite their use in illicit activities, cryptocurrencies offer transparency and security through their public, immutable transaction records.
As Russia navigates the complexities of these new crypto regulations, the global community will be watching closely. These developments could signal a broader trend towards the adoption of cryptocurrencies for international trade and financial transactions.
Robert Samms
Digital Assets Desk
