(Kitco News) – Russian lawmakers passed a bill on Tuesday that will legalize the use of cryptocurrencies for international trade as part of the country’s efforts to maintain business activities amid heavy sanctions imposed by Western nations following the country’s invasion of Ukraine.
Bloomberg was the first to report that lawmakers in the State Duma, the lower hose of parliament, passed the new law on Tuesday, along with a separate piece of legislation dealing with the regulation of crypto mining.
According to Elvira Nabiullina, Governor of the Bank of Russia (BoR), the new law is expected to go into effect in September, and the first crypto transactions will take place before the end of the year.
The primary goal of the legislation is to allow businesses to use cryptocurrencies to conduct cross-border payments, with the process being closely monitored and regulated by the central bank. It’s important to note that while the new law allows for cross-border cryptocurrency transactions, it does not lift the existing ban on crypto payments inside Russia.
Under the new law, the Bank of Russia will create a new experimental infrastructure for cryptocurrency payments, with the central bank saying they will release additional details in the future. The BoR will be the regulator on cryptocurrency issues, while the Federal Financial Monitoring Service, the Federal Tax Service, the Federal Security Service, and the Federal Property Management Agency will have roles in controlling the turnover of crypto.
With the Russian economy struggling under the weight of sanctions, it’s anticipated that the draft laws will see quick approval from senators in the Federation Council before being signed into law by President Vladimir Putin, allowing them to come into force on September 1.
“We are taking a historic decision in the financial sphere,” Anatoly Aksakov, the head of the majority in the Duma, told lawmakers. He added that under the new legislation, crypto will be regulated in the same way as foreign currency in Russia.
“Previously, there were fears that the legalization of cryptocurrency could create problems for the development of the domestic market,” Aksakov said in a phone interview with Bloomberg. While cryptocurrencies may help Russia to bypass Western sanctions, their use is “an objective phenomenon and cannot be ignored” by regulation, he added, saying that once the regulations are in place, “businesses can act boldly.”
Recent reports have detailed the struggles Russian businesses have had conducting cross-border transactions with trading partners such as China, India, and the United Arab Emirates after heavy sanctions resulted in banks in those countries becoming more cautious.
According to the Bank of Russia, the country saw an 8% decline in imports in the second quarter of 2024 as a result of increased sanctions and delays in payments. While the country has made efforts to adopt the currencies of its trade partners and develop an alternative payment system within the BRICS group of emerging economies, most payments are still conducted in dollars or euros and are routed through the international SWIFT system.
Because of this, counterparty banks are exposed to the risk of secondary sanctions, leading some to tighten their compliance procedures and avoid trade with Russia.
"The risks of secondary sanctions have grown. They make payments for imports difficult, and that concerns a wide range of goods," Nabiullina told members of the Federation Council on Tuesday, adding that payment delays have led to longer supply chains and rising costs. “We are ready to be flexible in external settlements.”
