- Russia’s new law permits cryptocurrency use in international trade to bypass Western sanctions.
- The central bank’s “experimental” crypto payment infrastructure aims to reduce trade delays and costs.
- The legislation also regulates crypto mining but maintains a ban on cryptocurrency payments within Russia.
Russia has passed a law enabling businesses to use Bitcoin and other cryptocurrencies for international trade according to Reuters. This initiative, intended to bypass Western sanctions imposed after Russia’s invasion of Ukraine, is a shift in the country’s financial strategy.
Law Aims to Mitigate Sanction Impact
Scheduled to take effect in September, the new legislation is a response to delays in international payments with major trading partners like China, India, and the UAE. These delays have been heightened by the cautious stance of banks in these countries, influenced by Western regulators.
Elvira Nabiullina, the Governor of the Russian central bank and a key supporter of the law, announced that the first cryptocurrency transactions are expected before the year’s end. The central bank will create an “experimental” infrastructure to facilitate these payments, though specific details have yet to be disclosed.
Addressing Payment Delays and Economic Strain
The central bank highlighted that payment delays have contributed to an 8% decline in Russian imports during the second quarter of 2024. Despite attempts to switch to partner currencies and develop a BRICS alternative payment system, many transactions still rely on the US dollar and euro via the SWIFT system, exposing banks to secondary sanctions.
Nabiullina emphasized the growing risk of secondary sanctions, which complicate import payments, extend supply chains, and increase costs. “The risks of secondary sanctions have grown,” she stated. “They make payments for imports difficult, and that concerns a wide range of goods.”
Legislative Package Includes Mining Regulations
The new law is part of a broader legislative package that also includes regulations on crypto mining and the circulation of other digital assets. However, it does not lift the existing ban on cryptocurrency payments within Russia.
Anatoly Aksakov, head of the Duma lower house of parliament, highlighted the significance of the legislation, calling it a “historic decision in the financial sphere.” The move aims to ease the economic challenges posed by sanctions and ensure smoother international trade operations.
Future of Russian Trade
This decision reflects Russia’s ongoing efforts to mitigate the impact of Western sanctions and maintain robust trade relationships. By integrating cryptocurrencies into its financial system, Russia hopes to reduce dependency on traditional payment systems and minimize the risk of sanctions disrupting its economy.
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