Regulation
Russia Races to Legalize Cryptocurrencies as Sanctions Weigh on Firms – BNN Bloomberg
(Bloomberg) — Russia is moving to regulate the use of cryptocurrencies as companies grapple with growing difficulties in foreign payments under the threat of U.S. sanctions over the war in Ukraine.
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Lawmakers in the lower house of parliament, the State Duma, will consider a draft law on cryptocurrencies, as well as separate legislation regulating cryptocurrency mining, in second and third readings on Tuesday.
The bills are expected to quickly gain approval from Federation Council senators before being signed by President Vladimir Putin and entering into force on September 1, according to Anatoly Aksakov, chairman of the Duma’s financial market committee.
“Previously, there were fears that legalizing cryptocurrencies could create problems for the development of the domestic market,” Aksakov said in a telephone interview. While cryptocurrencies could help Russia evade Western sanctions, their use is “an objective phenomenon and cannot be ignored” by regulation, he said.
The move marks a rapid shift in attitudes toward digital tools and comes as Russian companies face mounting payments pressures triggered by U.S. threats of secondary sanctions on foreign banks. While the use of digital currency for payments is currently banned in Russia, Putin this month urged the government “not to miss the moment” in regulating the method domestically and in foreign deals.
Cryptocurrencies “are increasingly used around the world as a means of payment in international settlements,” Putin told officials.
As recently as January 2022, just weeks before Russia began its full-scale invasion of Ukraine, the central bank proposed a complete ban on the use and creation of cryptocurrencies, arguing that they posed serious risks to financial stability and economic security.
The bank softened its stance late last year, supporting the experimental use of cryptocurrency and mining in cross-border transactions. However, it urged financial organizations in Russia not to advertise services related to digital currencies.
The Bank of Russia did not respond to a request for comment on the change in its position. First Deputy Governor Vladimir Chistyukhin said last month that the country should consider all options for overcoming difficulties in international payments, including those “that seemed unpopular to us yesterday.”
Under the legislation, cryptocurrencies will be regulated in the same way as foreign currencies in Russia, according to Aksakov. Companies involved in cryptocurrency and mining have been lobbying for the law to ensure that they “can work within normal legal frameworks” and not fear official investigations, he said.
Authorities are rushing the law because they hope cryptocurrencies will improve cross-border transfers, said Ani Aslanyan, an analyst who runs a cryptocurrency-focused Telegram channel. However, the U.S. is likely to monitor services and companies used by Russia to try to block them, sparking a race to stay ahead of sanctions.
Only large exporters will be willing to meet the conditions set out in the regulations, making cryptocurrency payments a “closed club” that excludes small and medium-sized businesses, Aslanyan said. For example, transactions will be limited to those who have mined cryptocurrency themselves, which only large companies in Russia currently do, he said.
According to the law, the Bank of Russia will be the regulatory authority for cryptocurrency issues, while the Federal Financial Monitoring Service, the Federal Tax Service, the Federal Security Service and the Federal Agency for Asset Management will play a role in controlling cryptocurrency turnover.
Once the regulations are in place, “companies will be able to act boldly,” Aksakov said.
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