Russia has made a significant shift in digital currency, announcing that it will allow businesses to use Bitcoin and other cryptocurrencies for international payments. This initiative is part of a larger strategy aimed at circumventing economic sanctions imposed by Western countries and reducing reliance on the US dollar.
According to recent reports, officials including Russian Finance Minister Anton Siluanov have stated that Russia has begun using digital financial assets (DFA), particularly Bitcoin mined domestically, for international transactions. Siluanov confirmed that Russian businesses have started utilizing cryptocurrencies for foreign trade (cross-border transactions), emphasizing the need to mitigate the economic impact of Western sanctions.
This strategic initiative follows recent legislative developments in Russia. The Russian parliament passed a law in July allowing the use of digital currencies in cross-border trade. By November, President Putin had officially signed legislation recognizing cryptocurrencies as property for foreign trade purposes. This legislation introduced tax incentives for digital transactions and exempted cryptocurrency mining and sales from value-added tax.
Putin has also publicly supported digital currencies, calling them an unstoppable tool for enhancing economic efficiency and stability. Siluanov shared this view, expressing optimism that the use of cryptocurrencies in international trade will expand next year. He stated, "As part of an experimental system, we can use the Bitcoin mined in the Russian Federation."
Furthermore, Siluanov stated in an interview that under the current circumstances, implementing digital financial assets (DFA) as an alternative to the US dollar in foreign trade is "completely understandable," as it can leverage modern infrastructure, which is an innovation in the global settlement system, adding that "this is the future."
The finance minister also mentioned that Russia legalized the mining industry earlier this year, saying, "That's why such transactions are taking place. We say they need to be developed and expanded, and I believe this will become a reality next year."
In addition to Bitcoin, blockchain analysis firm Chainalysis has stated that stablecoins like USDT and USDC also play a role in Russia's international trade. These digital assets offer high liquidity, but their centralized control may pose challenges to their broader application.
A six-year cryptocurrency mining ban will be implemented in 10 regions by 2025.
Additionally, Russia continues experimenting with the digital ruble, aiming to combine it with the transition to cryptocurrencies in international trade. The digital ruble has been in testing since August 2023, with around 30 companies and 11 cities using the currency.
Despite the shift towards digital currencies, according to TASS, the Russian government has approved a decree to fully ban cryptocurrency mining activities in 10 regions for six years starting January 1, 2025, until 2031. This decision aims to address the increasing energy demand from the cryptocurrency mining industry and local electricity shortages.
Affected regions include the Republic of Dagestan, the Republic of Ingushetia, the Kabardino-Balkar Republic, the Karachay-Cherkess Republic, the Republic of North Ossetia, the Chechen Republic, as well as the Donetsk and Luhansk People's Republics annexed by Russia. Additionally, parts of the Zaporozhye and Kherson regions will also be included in the ban. The ban will last until March 15, 2031.
To alleviate the power shortages exacerbated by the high energy demands of mining operations, the Russian government also announced seasonal restrictions on mining, termed "winter mining ban," to be implemented from January 1 to March 15 in the three Siberian regions of Irkutsk, Buryatia, and Transbaikal. In subsequent years, the restriction period will change to November 15 to March 15.
The Russian government emphasizes the necessity of fair energy distribution, especially amid a surge in winter energy demand. This decision was made after President Putin signed a law authorizing the government to impose restrictions based on regional energy needs.
This binary situation indicates that the government is cautiously balancing its domestic and international cryptocurrency strategies to mitigate the financial burdens brought by sanctions while managing the local impacts of mining activities.
The world is closely watching Russia's progress in using cryptocurrency for international trade, with Siluanov predicting that digital currencies will see broader applications in the near future. This move could set a precedent for other sanction-hit economies looking to diversify their financial systems.
"Turned to! Russia uses Bitcoin for international payments in response to sanctions" was first published in (Blockchain).
