Russia Unveils BRICS’ Crypto Strategy

Russia has finally disclosed its plans to use cryptocurrency for international trade within BRICS, aiming to challenge the dominance of the US dollar. The country is set to launch two crypto exchanges—one in Moscow and the other in St. Petersburg.

The primary objective is to support foreign economic activities (FEA) with a dedicated crypto infrastructure for BRICS trade, operating under an experimental legal framework. Sources indicate these exchanges will initially focus on “blue chip” assets but may have limited scope due to potential sanction risks.

The St. Petersburg exchange might leverage the existing St. Petersburg Currency Exchange (SPCE) framework, specifically targeting FEA. The Moscow exchange’s future is less certain—it could either integrate with the Moscow Exchange or operate independently under the experimental legal framework.

A significant part of this initiative involves introducing stablecoins pegged to the yuan and a broader BRICS currency basket. While stablecoins are a type of cryptocurrency, they come with challenges such as technology issues, liquidity, convertibility, and asset backing—challenges that Russia acknowledges.

Currently, Russia’s crypto regulation is in its infancy, primarily guided by the Federal Law No. 259-FZ on Digital Financial Assets, which outlines the legal basis for digital assets but lacks specific rules for operating exchanges. The relevant regulation for these exchanges is the recently passed Experimental Legal Regime (ELR), which leaves the details to the regulator.

Access to these exchanges is expected to be limited initially, with small and medium-sized businesses and individuals likely facing difficulties. Mikhail Uspensky, a member of the Russian State Duma’s expert council on crypto regulation, notes that the experiment’s future depends entirely on the regulator’s decisions.

Some analysts believe that these exchanges and stablecoins will only attract those with no other options. They suggest that the platforms might be used out of necessity rather than choice. Additionally, the transparent nature of blockchain could pose risks if transaction information leaks, potentially resulting in sanctions and complications for users, including those unrelated to Russia.

The centralized nature of these exchanges might further undermine trust, as analysts warn that it could damage the credibility of the entire project.