Regulation
Russia to use cryptocurrency in cross-border payments!
Russia passed two bills on cryptocurrencies on Tuesday, an important piece of legislation. After the attack on Ukraine, Russia was cut off from the global payment network. This affects its economy. While maintaining a complete ban on cryptocurrencies on its territory, it wants to use crypto payments internationally. Let’s see how these two bills can help Russia save its economy.
Crypto for international exchanges
In the first three readings, the Russian parliament has adopted two bills on cryptocurrencies. The first will allow Russia to use cryptocurrencies as a means of payment for international transactions. This law would allow the Central Bank of Russia to set up a pilot project that will explore different ways of using cryptocurrencies in cross-border transactions.
Western sanctions have hampered Russia’s international transactions. Trade with major partners such as China, the United Arab Emirates, and India has been disrupted. Russia faces significant delays in payments from international markets. Although Russia has tried to trade in its partners’ currencies, it makes most payments in dollars or euros through the international SWIFT system. This risks triggering secondary sanctions from Western regulators on partner countries’ banks.
According to the Central Bank of Russia, payment delays are causing serious damage to the economy, as they have already led to an 8% drop in Russian imports. Russia hopes that using cryptocurrencies will help it easily purchase banned goods, as cryptocurrencies are difficult to track. And using cryptocurrencies for cross-border trade will allow some industries to circumvent regulations. Russia is not the first country to take such measures. Out of fear of Western regulators, Venezuela has already taken this path.
Cryptocurrency Mining Regulations
The second bill passed by the lower house of the Russian government will legalize cryptocurrency mining in the country. This bill will require the Bank of Russia and the government to impose regulations for cryptocurrency mining. It will be monitored and administered by a federal entity. The goal behind all this is to make cryptocurrency mining legal in the country and make it easier to pay taxes, as it will ensure income declaration.
Looking forward
The lower house of the Russian parliament has already passed these bills and will soon send them to the upper house for voting. Once the upper house passes them, they will send them to the president for final approval. This bill also aims to reduce legal risks. They will sell the mined cryptocurrency without using Russian IT infrastructure. This will exempt these transactions from currency regulation. The bills, once approved, will come into force from September 1, 2024. Western regulators have already imposed sanctions on Russia and these bills will definitely add more bitterness to the whole scenario. It should be remembered that even though Russia is trying hard to implement these two cryptocurrency bills, it still completely bans the use of cryptocurrency for domestic professions.