In a major legislative move, Russia passed two cryptocurrency bills on Tuesday. After the attack on Ukraine, Russia was cut off from global payment networks. This has had an impact on the Russian economy. While it has banned cryptocurrencies entirely at home, it wants to use them internationally. Let’s take a look at how these two bills could help save Russia’s economy.
Cryptocurrency for international transactions
The Russian parliament has passed two cryptocurrency bills in their first three readings. The first bill allows Russia to use cryptocurrencies as a means of payment for international transactions. The law allows the Central Bank of Russia to establish a pilot project to explore how cryptocurrencies can be used in cross-border transactions.
Western sanctions have hampered Russia’s international transactions. They are experiencing disruptions in global transactions with key partners such as China, UAE, and India. Russia is experiencing significant delays in payments originating in international markets. Russia has tried to transact in the currencies of its partners, but most payments are in dollars or euros, and are made through the international SWIFT system. This risks secondary sanctions by Western regulators on banks in partner countries.
According to the Russian Central Bank, payment delays are causing serious damage to the economy, as Russian imports have already fallen by 8%. Russia hopes that cryptocurrencies will make it easier to buy banned goods, as they are difficult to track. And using cryptocurrencies for cross-border transactions could allow certain industries to bypass regulations. Russia is not the first country to take such a step. Venezuela, fearful of Western regulators, has already taken this route.
Cryptocurrency Mining Regulations
The second bill passed by the Russian government’s lower house will legalize cryptocurrency mining in Russia. The bill will require the Bank of Russia and the government to regulate cryptocurrency mining, which will be monitored and controlled by federal agencies. The goal of all this is to legalize cryptocurrency mining in the country and make it easier to pay taxes by ensuring income reporting.
Future Prospects
The lower house of the Russian parliament has already passed these bills and will soon be sent to the upper house for a vote. If the upper house passes them, they will be sent to the president for final approval. The bill also aims to reduce legal risks. They will sell cryptocurrencies mined without using Russian information infrastructure. This will exempt these transactions from currency regulations. If approved, the bill will come into effect on September 1, 2024. Western regulators have already imposed sanctions on Russia and these bills will certainly add more trouble to the whole scenario. It should be remembered that while Russia is working on implementing these two crypto bills, it still completely bans the use of cryptocurrencies in domestic transactions.