Russian lawmakers approved legislation that enables companies to utilize cryptocurrencies for international trade transactions. This move is part of Russia’s efforts to circumvent Western sanctions imposed following its invasion of Ukraine.
The legislation is anticipated to take effect in September, and according to Elvira Nabiullina, the governor of the Russian central bank and one of the law’s supporters, the initial cryptocurrency transactions will occur before the end of the year.
Russia has encountered significant delays in international payments with major trading partners such as China, India, and the United Arab Emirates, as banks in those countries have become more cautious due to pressure from Western regulators.
Anatoly Aksakov, the head of the Duma lower house of parliament, declared to lawmakers, “We are taking a historic decision in the financial sphere.”
Under the new law, the central bank will establish a new “experimental” infrastructure for cryptocurrency payments, although the specifics of this infrastructure have not yet been disclosed. The law is part of a broader package that also includes regulations on cryptocurrency mining and the circulation of other digital assets. However, the existing ban on cryptocurrency payments within Russia will remain in place
The central bank reported that payment delays have become a significant challenge for the Russian economy, resulting in an 8% decrease in Russian imports during the second quarter of 2024. Despite Russia’s attempts to switch to the currencies of its trading partners and develop an alternative payment system within the BRICS group of emerging economies, many payments still involve dollars and euros and are processed through the international SWIFT system.
This situation exposes banks in countries trading with Russia to the risk of secondary sanctions, compelling them to strengthen their compliance procedures. Nabiullina emphasized, “The risks of secondary sanctions have grown. They make payments for imports difficult, and that concerns a wide range of goods,” highlighting that payment delays have resulted in longer supply chains and increased costs.