Russia is looking at cryptocurrency as a way to mitigate sanctions and expand its ability to process international payments, according to a new report from Chainalysis.
Chainalysis reports that Russia is positioning itself to overtake the US and become the world leader in cryptocurrency mining by passing a new bill allowing legal entities and registered entrepreneurs to mine digital assets.
"This regulatory move raises important questions about the classification of cryptocurrency mining outside of Russia, particularly in light of the broad sectoral sanctions imposed by the US and Europe on the Russian energy sector. Russia's authorization and oversight of cryptocurrency mining suggests a strategic alignment with national interests, despite ongoing international sanctions targeting Russia's energy resources."
While blockchain's large-scale sanction avoidance is unlikely (largely due to a lack of liquidity), Chainalysis argues that cryptocurrency's integration into Russia's financial system could still have implications for U.S. national security.
The company shares information about a Russian “instant exchanger” that allows users to transfer funds from their accounts at sanctioned banks without going through the KYC (know your customer) procedure, and then receive cryptocurrency in exchange to their wallet.
“Government-linked actors that may seek to exploit the new developments include fundraisers supporting pro-Russian militants in Ukraine, intermediaries helping oligarchs and other politically exposed persons engage in capital flight, or Russian-language instant exchangers with no KYC requirements servicing deposits and withdrawals for sanctioned Russian banks. These smaller-scale operations could have serious implications, highlighting the broader security and compliance risks associated with such transactions.
Below we see the interface of the Russian instant exchanger.
Last month, Bloomberg reported that the Russian government wants to use digital tokens for cross-border transactions to ease payment difficulties for its companies hit by international sanctions.
Russia will try to use the National Payment Card System (NSPK) to trade rubles and cryptocurrency assets in testing a payment and exchange platform, according to people “with knowledge of the situation and who asked not to be identified because they are discussing private information.”
NSPK was created in 2014 and is wholly owned by the Central Bank of Russia, but in February 2024 it was sanctioned by the US Treasury Department.
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