Regulation
Russia to use cryptocurrencies in off-border payments!
In a significant legislative move, Russia passed two cryptocurrency bills on Tuesday. After their attack on Ukraine, Russia has been cut off from the global payment network. This is affecting their economy. By maintaining a complete ban on cryptocurrency domestically, they want to use cryptocurrency payments internationally. Let’s explore how these two bills can help Russia save their economy.
Cryptocurrencies for international trade
In the first three readings, the Russian parliament has approved two bills on cryptocurrencies. The first will allow Russia to use cryptocurrencies as a payment method for international trade. This law would allow the Central Bank of Russia to create a pilot project that will explore ways to use cryptocurrencies in cross-border transactions.
Western sanctions have hampered Russian international transactions. They are experiencing disruptions in global trade with their key partners such as China, the United Arab Emirates and India. Russia faces significant delays in payments from international markets. Although Russia has sought to trade in its partners’ currencies, it conducts most payments in dollars or euros to go through the international SWIFT system. This risks secondary sanctions from Western regulators on banks in partner countries.
According to the Central Bank of Russia, the delay in payments is causing serious damage to the economy, as it has already caused an 8% drop in Russian imports. Russia hopes that the use of cryptocurrencies will help them easily purchase prohibited goods, as cryptocurrency is difficult to trace. And the use of cryptocurrencies for cross-border trade will allow certain industries to circumvent regulations. Russia is not the first country to take such measures. Fearing Western regulators, Venezuela has already taken this path.
Cryptocurrency Mining Regulation
The second bill passed by the lower house of the Russian government will legalize cryptocurrency mining in the country. This bill will require the Bank of Russia and the government to issue regulations for cryptocurrency mining. This will be monitored and administered by a federal entity. The goal of all this is to make cryptocurrency mining legal in the country and make it easier to pay taxes, as this will ensure tax reporting.
Looking forward
The lower house of the Russian parliament has already approved these bills and will soon send them to the upper house for a vote. Once the upper house approves them, they will send them to the President for final approval. This bill also aims to reduce legal risks. They will sell the cryptocurrency mined without using Russian information infrastructure. This will exempt these transactions from currency regulations. Once approved, the bills will come into effect from September 1, 2024. Western regulators have already imposed sanctions on Russia and these bills will surely add more bitterness to the whole scenario. It should not be forgotten that even though Russia is working on implementing these two cryptocurrency bills, they still completely ban the use of cryptocurrencies for national trade.