Russia is moving to regulate the use of cryptocurrencies as companies face increasing difficulties in foreign payments due to US sanctions over the war in Ukraine, Bloomberg reported. Lawmakers in the lower house of parliament, the State Duma, are set to consider a cryptocurrency bill in the second and third readings on Tuesday, alongside separate legislation regulating crypto mining.
The draft laws are expected to gain quick approval from senators in the Federation Council before being signed into law by President Vladimir Putin to take effect on September 1, according to Anatoly Aksakov, head of the Duma’s financial market committee.
Cryptocurrencies to Rescue Russia?
“Previously, there were fears that the legalization of cryptocurrency could create problems for the development of the domestic market,” Aksakov said. He noted that while cryptocurrencies may help Russia bypass Western sanctions, their use is “an objective phenomenon and cannot be ignored” by regulation.
With the US threatening to impose secondary sanctions on international banks, Russian firms are facing increasing financial pressure. This decision is a significant shift in the country’s stance towards digital currencies.
Although it is presently illegal in Russia to use digital money for payments, Putin recently urged the government to “not miss the moment” and start regulating the practice both domestically and abroad. Cryptocurrencies “are increasingly used in the world as a means of payment in international settlements,” Putin informed officials.
The Ban on Cryptocurrencies in Russia
The central bank suggested a complete prohibition on the usage and creation of cryptocurrencies as recently as January 2022, just weeks before Russia launched its full-scale invasion of Ukraine, claiming that they presented serious hazards to economic security and financial stability.
By year’s end, the bank did, however, reposition itself to allow cryptocurrency mining and experimental use in cross-border settlements, even if it was still advising Russian financial institutions not to advertise services on virtual currencies.
When Bloomberg asked for a statement regarding the shift in its stance, the Bank of Russia remained silent.
Last month, First Deputy Governor Vladimir Chistyukhin stated that the nation has to take into account every option for getting around obstacles with foreign payments, even ones “that seemed unpopular to us yesterday”.
A New Hope for Cryptocurrencies in Russia
According to Aksakov, the law will control cryptocurrencies in Russia like that of foreign exchange. Companies in the mining and cryptocurrency industries worked hard to get the law changed so that “they can work within normal legal frameworks” and not be afraid of government investigations.
According to Ani Aslanyan, an analyst who manages a Telegram group devoted to cryptocurrencies, the government is hurrying through the law because they believe cryptocurrencies would enhance cross-border payments.
But the US will probably keep an eye on the businesses and services that Russia uses to attempt to block them, starting a race to stay ahead of sanctions. Aslanyan claims that cryptocurrency payments are analogous to a “closed club” that excludes small and medium-sized enterprises because only large exporters are likely to be able to achieve the requirements outlined in the rules.
The Federal Property Management Agency, Federal Tax Service, Federal Security Service, and Federal Financial Monitoring Service will all play a part in regulating the turnover of cryptocurrency, while the Bank of Russia will oversee its issuance, as per the law. “Business can act boldly” after the regulations are in place, according to Aksakov.
Russia currently restricts the use of cryptocurrencies in payments, and the new law is likely not going to change that. The main obstacle facing the Russian economy, according to the central bank, is payment issues.
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