In light of Western sanctions preventing Russians from receiving payments from abroad and even purchasing goods from international websites, a government official said there were “active discussions” about the use of crypto assets.
Significant Changes to Support a War Economy
As Putin’s government explores all alternatives to mitigate the impact of the sanctions — such as blocking Swift transfer messages at the country’s most popular bank — the latest solution it has found is unprecedented.
For international transactions, the Kremlin plans to allow payments in cryptocurrencies, assets that are traded on a blockchain and not controlled by a central authority.
“The idea of using digital currencies in international settlement transactions is being actively discussed,” Ivan Chebeskov, head of the finance ministry’s department of finance, told Russia’s Interfax news agency.
In other words, Russian consumers who have a crypto-asset wallet on an online platform or on a USB stick (general ledger) can use it to circumvent another account holder’s crypto ban.
He added that allowing cryptocurrencies as a way to settle international trade would help counter the impact of Western sanctions, leaving Russia “limited” access to traditional cross-border payment methods.
“The proposed changes aim to create a legal market for digital currencies by establishing rules for their distribution and the circle of authorized participants,” the ministry said in a statement in February.
Citing government officials, Vedomosti newspaper reported Friday that the Ministry of Finance was discussing adding the latest proposal on international payments to an updated version of the bill.
A double challenge for Russia
For Moscow, the challenge is twofold. One is to support the ruble, a national currency that can no longer rely on foreign exchange reserves frozen by the Russian central bank. Indeed, if the ruble depreciates too much, prices – already affected by high inflation following the cessation of foreign imports – will only rise for Russians.
In the face of an already dizzying economic recession, this was enough to erode popular support for Vladimir Putin’s regime and policies. Lower central bank interest rates only support this war economy.
One of the proposed changes is the use of cryptocurrencies as a means of payment for “foreign trading activities of legal entities and individual entrepreneurs”.
“Using in particular the identifier provided by the operator of the digital commercial platform, it will be possible to pay for goods, works, services, intellectual activities (…) the source traces the essence of the innovation” , the newspaper reports.
Another interest in the authoritarian regime for cryptocurrencies is participation in reducing reliance on the US dollar for international trade.
In this sense, the central bank is already experimenting with a digital ruble, a centralized digital currency (MNBC), to create a new monetary order in it and with new partners, starting with China which is already at the forefront of electronic money with are Yuan.
But Russian officials clearly want to go beyond the central bank’s plan, which opted for a crypto ban in favor of its MNBC, and allow the cryptocurrency market more broadly while regulating it.
Another proposal is to require cryptocurrency trading platforms to cooperate with regulatory authorities regarding “three years of retention of information about digital currency owners and transactions with them in Russia”.