Russia weighs risk of embracing crypto for international payments

Russia should accelerate the creation of infrastructure for payments in cryptocurrencies but carefully weigh the associated risks, its money laundering watchdog said in a statement, ahead of a parliamentary vote on digital assets legislation.

Russia has faced significant delays in international transactions with major trading partners such as China, India, the United Arab Emirates and Turkey, after local banks, under pressure from Western regulators, have become more cautious.

The new legislation, expected to be reviewed by parliament on July 23, will allow the use of cryptocurrency transactions in international payments to maintain trade flows.

“This is a need for businesses, especially in cases involving sanction mechanisms, when they need to enter the international market, and it can’t always be resolved through standard methods,” said the watchdog’s head, Yuri Chekhanchin.

Countries such as Venezuela already use transactions in cryptocurrencies to bypass international sanctions, prompting concerns among US lawmakers who have raised the issue with the Biden administration.

Chekhanchin highlighted loose cryptocurrency legislation in some countries as the main risk and said his watchdog should have the right to block such transactions when they break Russian law. He did not name the countries he had in mind.

Cryptocurrencies are currently not allowed for payments inside Russia, and the new law is unlikely to change that. Earlier, the central bank admitted that payment problems were one of the key challenges for the Russian economy.

President Vladimir Putin also spoke on Wednesday at a government meeting on the use of digital currencies. Apart from his opening remarks, the meeting was closed to the public.

Putin praised the experimental introduction of a digital rouble, a blockchain-based asset backed by the central bank.

Russian and Iranian central banks are working to connect their digital currency systems, which would allow the two sanctioned countries to carry out bilateral transactions. Similar negotiations are underway with China and Belarus.

Putin said the massive energy consumption of cryptocurrency mining farms posed risks to energy supplies in some regions of Siberia, where many such farms have sprung up exploiting low local electricity prices.

He said tax and electricity tariff regulation for mining farms should be part of the new law.