The Bank of Russia, the nation’s central bank, and the Russian Ministry of Finance are seriously considering a reversal of their stance on the use of crypto for cross-border payments given the unfavorable geopolitical climate at the moment, according to reports on September 5, 2022.
Russia Makes U-Turn on Bitcoin
Russia’s Deputy Finance Minister Alexei Moiseev has confirmed in an interview with a local TV channel that both the Ministry of Finance and the country’s apex bank have reconsidered their approach to bitcoin and other cryptocurrencies, and are now convinced that it is “necessary” to legalize cross-border payments in blockchain-based digital assets.
In his words:
“As for the regulation of the cryptocurrency market, the difference in approaches has remained. But I can say that the Central Bank has also rethought [the approach], taking into account the fact that the situation has changed, and we are rethinking it.
Because the infrastructure that we plan to create is too rigid for the use of cryptocurrencies in cross-border settlements, which, of course, we must, first of all, legalize somehow. On the one hand, give people the opportunity to do it, on the other hand, put it under control so that there is no laundering, paying for drugs, and so on,”
Hinting that there would be a regulatory framework put in place.
According to the Russian official, both parties have agreed that amidst the barrage of international sanctions hammered upon Russia, “it is impossible to do without cross-border settlements in cryptocurrency.”
The change of heart didn’t come as a sudden surprise as many experts believe there have been calls within the government to consider utilizing crypto as a form of international trade payment.
It will be recalled that in April 2022, Russia’s Federal Tax Service (FTS) proposed to the Ministry of Finance to allow companies to use cryptocurrencies for certain operations, to let corporate entities pay for goods and services according to foreign trade contracts, and receive revenue from foreign entities in digital currency.
Circumventing Sanctions with Bitcoin
When Russian forces invaded Ukraine in February 2022, and major players in the global economy placed heavy sanctions on Russia, investors in the country began ditching the ruble and converting to bitcoin (BTC) following a plunge in the Russian currency’s value as a result of the economic sanctions.
There were growing calls for crypto exchanges to ban Russian users from their platforms but some bitcoin trading venues have so far chosen not to suspend their services to their Russian customers. One of the most high-profile responses came from Coinbase CEO Brian Armstrong, who made it clear that “ordinary Russians are using crypto as a lifeline.” Another exchange giant, Binance also didn’t ban Russian users outright but curtailed trading activities of Russian accounts.
Due to the decentralized features of cryptocurrency and blockchain technology, countries that have been hit hard by economic sanctions will be utilizing cryptocurrency to circumvent these restrictions.
Countries like Cuba have begun the process of accepting cryptocurrency as a standardized payment method, most recently, Iran has begun to use cryptocurrencies to settle cross-border trade dealings, as the country seeks alternatives to the US dollar and the international banking system.
With crypto gaining more global adoption by the day, we will continue to see more individuals and countries, turning to crypto in the face of unpleasant uncertainties like inflation or economic sanctions.