Russia is set to increase surveillance on cross-border cryptocurrency transactions as part of its broader strategy to control illegal transfers and regulate capital flows. Over the next six months, the Bank of Russia will closely monitor these transactions in collaboration with 19 major banks while advancing its central bank digital currency (CBDC) development.
Bank of Russia targets cross-border Crypto transactions
The Bank of Russia has announced its plan to monitor all cross-border cryptocurrency transfers involving Russian citizens. This initiative will involve 19 major financial institutions, including Citibank, MTS Bank, and Raiffeisenbank. These banks will provide detailed reports on each transfer’s methods, parties involved, and payment systems. The monitoring system aims to identify and control illegal transfers and regulate capital outflows.
Kristina Mkrtchyan from Moscow Digital School highlighted the program’s intent to gather data that could inform future policies. However, there are concerns about the accuracy of the data, mainly since many cryptocurrency transfers occur through peer-to-peer (P2P) transactions, which are harder to track. The program is part of a broader effort by the Russian government to increase its control over cryptocurrency activities in the country.
Shift in Russia’s Crypto strategy amid international tensions
Russia’s stance on cryptocurrency has shifted significantly in recent years, particularly after the country’s geopolitical tensions with the United States intensified. In July, Russia approved the use of cryptocurrency for international payments, marking a departure from its previously cautious approach to digital assets. The Putin administration has since been exploring cross-border digital settlements to circumvent Western sanctions.
Russia has taken steps to legalize cryptocurrency mining, with a new bill expected to be signed in November. This move is part of the country’s broader strategy to diversify its financial infrastructure while reducing its reliance on the U.S. dollar. As the country prepares for the conclusion of U.S. elections in late 2024, this quarter will be crucial for Russia’s cryptocurrency and financial policies.
Russia’s CBDC development gathers pace
At the same time, Russia has been accelerating the development of its own CBDC, the digital ruble. The Bank of Russia has been working on this project since 2020, unveiling a prototype in 2022 before officially launching the digital currency in 2023. According to the Atlantic Council, Russia aims to massively adopt the digital ruble by 2027, with plans to begin widespread acceptance by 2025.
The central bank has reassured the public that introducing the digital ruble will not impact inflation, emphasizing that it will simply change the structure of money from cash to digital without altering the overall supply. However, Russia continues to face inflationary pressures due to the ongoing war with Ukraine and increased military spending. The Bank of Russia recently raised its key interest rate from 18% to 19% to combat inflation.
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