Bitcoin
Russia legalizes cryptocurrencies for international trade amid sanctions
Illustrative image of two commemorative bitcoins seen in front of the Russian national flag displayed on a computer screen.
Arthur 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 financial pressure due to Western sanctions.
The State Duma, the lower house of the Russian parliament, gave the initial green light on Tuesday to new legislation that would allow companies to use cryptocurrencies for international trade, local media reported.
“We are making a historic decision in the financial sphere,” Duma head Anatoly Aksakov told lawmakers on Tuesday, according to a report by the Reuters news agency.
Mati Greenspan, CEO of cryptocurrency market research firm Quantum Economics, said Russia’s acceptance of cryptocurrencies makes sense as bitcoin transactions “cannot be censored or blocked by any government or bank.”
“Previously, Russia would not allow this kind of transactional freedom to its citizens — but now we have reached the point where bitcoin is used so frequently in everyday commerce that the opportunity cost of them not allowing it is simply too high,” he added.
Bitcoin prices have more than doubled in the past year amid optimism over the approval of the first US spot bitcoin — and, more recently, ether — exchange traded fundsas well as the the so-called halving event which reduces the supply of newly issued tokens.
The world’s largest digital currency is currently worth $66,000, according to data from CoinGecko, an increase of more than 120% in the past 12 months.
Rising tensions between Russia and the US and its allies have led to numerous sanctions on individuals and entities in Russia in retaliation for the attack on Ukraine.
The US, the 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 numerous oligarchs.
In addition to passing legislation allowing Russian companies to conduct international transactions using cryptocurrencies, the Russian central bank will also receive permission to move money abroad using private digital currencies.
Elvira Nabiullina, governor of the Russian central bank, said on Tuesday that cryptocurrency-based payments would start to take place before the end of 2024.
“We are already discussing the terms of the experiment with ministries and departments, with companies, and we hope that the first payments will take place before the end of this year,” she said.
The central bank’s commitment to using cryptocurrencies as an international payment method marks a reversal of the regulator’s previous stance on the technology.
In January 2022, the Russian central bank proposed to ban the use of cryptocurrencies for transactionsas well as digital currency mining, citing threats to financial stability, citizen well-being and monetary policy sovereignty.
Separately, Russia is also exploring the implementation of a digital version of the ruble. Central Bank Governor Nabiullina said on Tuesday that the regulator will seek to move away from a pilot phase to the mass implementation of the digital ruble starting in July 2025, Russian news agency Interfax reported.
Central bank digital currencies, or CBDCs, are different from cryptocurrencies. Unlike bitcoin and other cryptocurrencies, which do not have a central authority governing them, CBDCs are issued directly by a government and are designed to replicate fiat currencies in the form of a digital token.
Quantum Economics’ Greenspan said Russia’s decision to accept cryptocurrencies “makes perfect sense from a global trade perspective.”
This, he added, “will help Russians open up cross-border payments with countries and companies that would otherwise be closed to them due to US sanctions.”
Other sanctioned countries have often attempted to circumvent such financial restrictions through the use of cryptocurrencies. North Korea, for example, has been accused on several occasions of raising millions of dollars in cryptocurrencies to help fund various state programs and evade foreign sanctions.
The North Korean state-backed hacking group Lazarus was behind a major heist in Ronin Network — a blockchain that powers a popular non-fungible token (NFT) game called Axie Infinity. The hack resulted in cybercriminals making off with more than $600 million worth of digital tokens, blockchain analytics firms Elliptic and Chainalysis previously said.
Iran has also been accused of exploring digital currencies to circumvent international trade barriers.
Cryptocurrency advocates, on the other hand, also argue that digital assets are a useful tool for combating illicit activity. This is because the networks that support them, called blockchains, are public and show a historical record of transactions that is cryptographically secure and cannot be altered.