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Russia will turn to cryptocurrency as the newest method to circumvent heavy international sanctions that have taken their toll on the economy amid its ongoing war efforts in Ukraine.
“We are taking a historic decision in the financial sphere,” Anatoly Aksakov, head of the Duma lower house, told lawmakers, according to Reuters. The Duma passed the bill on Tuesday after three readings.
The U.S. and Western allies applied severe sanctions on Russia following its invasion of Ukraine, including the extreme decision to cut off some Russian bank access to the SWIFT banking system.
Russia since then has tried to use the currency of trading partners, including convoluted transfer schemes to try and skirt sanctions, but the heavy global reliance on dollars and euros has hampered such efforts – forcing Moscow to seek alternatives, such as digital currencies.
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Russian President Vladimir Putin speaks during his meeting at the Senezh Management School, on June 14, 2024, in Solnechnogorsk, Russia. (Contributor/Getty Images / Getty Images)
The bill will now go to the upper Federation Council before Russian President Vladimir Putin gives it the final approval. New measures will help regulate mining, which already happens across the country as one of the world’s largest crypto-mining nations.
Putin has previously tried to limit crypto-mining in Russia over concerns about the huge demands on the energy grid. The country’s cooler temperatures and cheap cost of electricity attracts mining hopefuls.
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Russian State Duma members and other participants listen to President Vladimir Putin’s speech during his inauguration at the Alexandrovsky Hall of the Grand Kremlin Palace, on May 7, 2024, in Moscow, Russia. (Contributor/Getty Images)
“Previously, there were fears that the legalization of cryptocurrency could create problems for the development of the domestic market,” Aksasov said during a phone interview with Bloomberg. He argued that cryptocurrencies have continued to grow and that they “cannot be ignored.”
The new bill achieves regulation by limiting large-scale mining to companies on a government-approved list who will need to provide transaction data, Barron’s reported. The Russian Central Bank will capitalize on the new regulations with plans for a government-backed “digital ruble” that the bank argues will enhance the country’s economic infrastructure.
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Elvira Nabiullina, Governor of Russia’s Central Bank, speaks during an interview in Moscow, Russia, on June 27, 2019. (Reuters/Evgenia Novozhenina//File Photo / Reuters)
The law would take effect in September. Cryptocurrency will remain invalid for payments within Russia, but will allow the Kremlin to rapidly handle delayed payments with key trading partners, such as China, India and the UAE.
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The first Russian official crypto transactions will take place before the end of the year, Russian Central Bank Governor Elvira Nabiullina said, according to Bitcoin Magazine. The payment delays have caused an 8% decrease in Russian imports this year.
“The risks of secondary sanctions have grown,” Nabiullina said. “They make payments for imports difficult, and that concerns a wide range of goods.”
