TLDR:
Russia is set to trial cross-border crypto payments starting September 1, 2024
The move aims to circumvent international sanctions imposed after the Ukraine invasion
A new law gives Russia’s central bank broad powers to oversee an “experimental” crypto regime
Experts are skeptical about the effectiveness due to blockchain traceability and liquidity issues
The law also includes regulations for crypto mining with energy consumption limits
Russia is set to begin a trial of cross-border cryptocurrency payments on September 1, 2024, as part of efforts to circumvent international sanctions imposed following its invasion of Ukraine.
A new law, passed in July and signed by President Vladimir Putin, allows for the use of cryptocurrencies in international trade while maintaining the existing ban on crypto as legal tender within Russia.
The legislation grants broad powers to Russia’s central bank to oversee an “experimental” regime for crypto transactions. While specific details remain unclear, the law allows the central bank to establish and modify rules for the program at its discretion.
The National Payment Card System will reportedly be used to facilitate conversions between rubles and cryptocurrencies during the trial period.
Russia’s economy has faced significant challenges due to sanctions imposed by Western nations and their allies. Since February 2022, the country has been hit with over 16,500 sanctions from countries including the United States, United Kingdom, European Union, Australia, Canada, and Japan.
These measures have frozen approximately half of Russia’s foreign currency reserves, worth about 300 billion euros, and disconnected select Russian banks from the SWIFT interbank messaging system.
Russian officials have explicitly stated that the new crypto legislation is intended to help counter these sanctions. President Putin emphasized the need to establish a legal framework for cryptocurrencies, noting their increasing use in international settlements.
Elvira Nabiullina, the Governor of Russia’s central bank, acknowledged that the growing risk of secondary sanctions has made it difficult for Russia to conduct international trade, particularly for imports.
However, experts express skepticism about the potential effectiveness of this strategy. Blockchain analytics firms point out that cryptocurrency transactions are traceable, which could allow Western governments to track and investigate such activities.
There are concerns about whether crypto markets have sufficient liquidity to support large-scale sanctions evasion without drawing attention or causing significant price fluctuations.
The new law also addresses cryptocurrency mining within Russia. It establishes regulations for mining operations, including energy consumption limits set by the government. Individuals who stay within these limits will be allowed to mine digital currencies without being included in an official register.
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