Blockchain
Russia Gives Green Light to Use Cryptocurrencies for International Trade
Cryptocurrency enthusiasts, beware!
In a significant legislative move, Russia passed two crucial cryptocurrency bills on Tuesday, aiming to ease the economic impact of Western sanctions following their invasion of Ukraine. With its economy suffering from being cut off from the global payments network, Russia is seeking to leverage cryptocurrency for international transactions while maintaining a nationwide ban.
Let’s see how these two bills could help the Russian economy.
Cryptocurrency for international trade
The Russian parliament has passed two major cryptocurrency bills in three readings. The first bill allows the use of cryptocurrencies as a payment method for international trade. This law allows the Central Bank of Russia to launch a pilot project that explores how cryptocurrencies can be used in cross-border transactions.
Western sanctions have severely disrupted Russia’s international transactions, causing disruptions to business with key trading partners such as China, the United Arab Emirates, and India. These sanctions have led to delays in payments from international markets. Despite attempts to trade using its partner currencies, most payments are still based on the dollar or euro, which pass through the international SWIFT system, risking secondary sanctions on banks in partner countries.
Further details
According to the Central Bank of Russia, payment delays have severely damaged the economy, contributing to an 8% drop in imports. Russia hopes that the use of cryptocurrencies will make it easier to purchase prohibited goods, as they are harder to track. By using cryptocurrencies for cross-border trade, some industries can potentially circumvent regulations.
Russia is not the first to adopt such measures: Venezuela has already adopted similar strategies to evade Western control.
Legalization of cryptocurrency mining
The second bill, passed by the lower house of the Russian government, legalizes cryptocurrency mining within the country. This bill requires the Bank of Russia and the government to establish regulations for cryptocurrency mining, supervised by a federal entity. The main goal is to legitimize cryptocurrency mining, facilitate tax payment, and ensure tax reporting.
The lower house of the Russian parliament has approved these bills and will soon send them to the upper house for a vote. Once approved by the upper house, they will be sent to the President for final approval. These bills also aim to reduce legal risks by allowing the sale of cryptocurrencies mined without using Russia’s information infrastructure, thereby exempting these transactions from currency regulations. If approved, the bills will come into effect on September 1, 2024.
What’s next?
Western regulators have already imposed severe sanctions on Russia, and these new cryptocurrency laws are likely to increase tensions. Despite Russia’s efforts to implement these cryptocurrency measures, domestic use of cryptocurrencies remains completely prohibited.
By adopting these two laws, Russia is making a bold attempt to circumvent international sanctions and stabilize its economy. The effectiveness of this strategy, however, remains to be seen as global reactions unfold.
Read also: Cryptocurrency Regulation in Russia 2024 – A Pool of Talent in Blockchain Development
This is a developing story. Check back for updates on Russia’s crypto journey.