- Russian lawmakers have passed a bill enabling businesses to use cryptocurrencies for international trade, aiming to bypass Western sanctions
- The bill is part of a broader strategy to counteract economic reprisals following Russia’s Ukraine invasion
- The law, effective in September, has received support from central bank Governor Elvira Nabiullina, with initial transactions expected by year-end
Russian lawmakers have passed a bill allowing businesses to utilize cryptocurrencies for international trade, affording the country the possibility of circumnavigating Western sanctions. This development comes as part of a broader strategy to bypass economic reprisals imposed following Russia’s incursion into Ukraine, which have crippled the country. The new law, which is set to take effect in September, has garnered support from key figures, including Russian central bank Governor Elvira Nabiullina, who announced that the initial cryptocurrency transactions under this law are anticipated to occur before the end of the year.
Russia Feeling the Pinch
Following its invasion of Ukraine in 2023, Russia has experienced notable delays in international payments with major trading partners such as China, India, and the United Arab Emirates. This slowdown is largely due to banks in these countries becoming increasingly cautious under pressure from Western regulators.
The central bank has highlighted that payment delays pose a significant challenge to the Russian economy, contributing to an 8% decrease in Russian imports during the second quarter of 2024.
Despite efforts to transition to the currencies of its trading partners and to develop an alternative payment system within the BRICS group of emerging economies, a substantial portion of transactions still occur in dollars and euros via the international SWIFT system.
This reliance exposes banks in countries trading with Russia to the risk of secondary sanctions, necessitating stricter compliance measures. Governor Nabiullina emphasized, “The risks of secondary sanctions have increased, complicating payments for imports and affecting a wide range of goods.”
“Historic Decision”
To counter this, Russia plans to use cryptocurrencies for international payments, thanks to its borderless and frictionless nature. “We are making a historic decision in the financial sector,” stated Anatoly Aksakov, head of the Duma lower house of parliament, as he addressed fellow lawmakers. She noted that these payment delays have resulted in longer supply chains and higher costs.
The legislation mandates the central bank to establish a new “experimental” framework for cryptocurrency payments. However, specific details about this infrastructure remain undisclosed, which is unsurprising.
This new law is part of a broader legislative package that also introduces regulations for cryptocurrency mining and the circulation of other digital assets. Importantly, the law does not lift the existing ban on cryptocurrency payments within Russia’s borders.
