Russia is changing its approach to cryptocurrencies: sanctions forced to make desperate decisions

The Ministry of Finance and the Central Bank are ready to legalize cross-border payments

The Bank of Russia and the Ministry of Finance have finally agreed in their attitude to cryptocurrency, but so far this only applies to cross-border settlements. Both branches of the financial authorities consider it necessary to legalize such transactions, as reported by Deputy Finance Minister Alexei Moiseev. This decision can be called a breakthrough, because even at the beginning of this year, the Central Bank opposed “money surrogates” and any attempts to legalize them. But, probably, desperate times even require desperate decisions from the regulator, especially after the Prime Minister of the Russian Federation Mikhail Mishustin took the initiative to introduce digital assets into trading operations.

At the beginning of the year, the Bank of Russia demanded a ban on the issuance of cryptocurrencies on the territory of our country, as well as their use as investments. The department of Anton Siluanov looked at the situation differently. In February, the Ministry of Finance put forward a bill on the regulation of cryptocurrencies, where it noted that it is still prohibited to use them as a means of payment within the country, but they can be considered as an investment tool. After imposing a record number of sanctions against Russia, the regulator turned its anger towards previously unacceptable “money surrogates” into some mercy. According to the head of the Central Bank, Elvira Nabiullina, cryptocurrencies can be used in international settlements, but they should not penetrate organized trading within the country. At the end of August, Mikhail Mishustin also joined the discussion. He suggested introducing digital assets to pay for imports and exports. According to the Prime Minister of the Russian Federation, this will be a safe alternative for all parties, although he did not specify which assets could be used for these transactions.

And now, in September, Moiseev’s statement followed. “As for the regulation of the cryptocurrency market, the difference in approaches remains,” he said. — But I can say that the Central Bank has 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, to give people the opportunity to do it, on the other hand, to put it under control so that there is no money laundering, paying for drugs, and so on.”

It is curious that even the positive statements of the authorities about the possibility of using cryptocurrency for foreign economic activity (FEA) evoke polar emotions among experts. According to Igor Runts, CEO of BitRiver, the introduction of cryptocurrency mining and its circulation under state control into the legal field will lead to an increase in investment in fixed assets in many regions of Russia – at least within the framework of projects for the construction of data centers for energy-intensive computing; to the creation of thousands of new jobs; to additional tax deductions to the budget for tens of billions of rubles.

But there is another opinion. “Unfortunately, there is no talk of any legalization of cryptocurrencies or payments in cryptocurrencies within the Russian Federation,” Sergey Mendeleev, executive director of InDeFi Smart Bank, gives his assessment of the regulators’ statements. — The position of the Central Bank on this issue remains clear, tough and unchanged. Actually, this is the main question of where and how interested parties will take cryptocurrencies for foreign economic activity.” It is very important to distinguish between digital assets in the understanding of Russian legislation and recognized world cryptocurrencies and stablecoins, which so far are compatible with each other approximately like the North Korean Internet is with the world. The key here is the presence of both the actual crypto exchange itself and strict legislation governing these relations. At the moment there is nothing similar in Russia. “In our country, it is impossible to legally acquire cryptocurrency, and even more so, to do it on behalf of a legal entity and pay off with someone. The development of legislation in this area is a complex process that has not actually begun yet. And simple slogans – “Give crypto for foreign economic activity” – here, of course, you will not help the cause, ”the expert is sure.

“The legalization of cryptocurrencies in cross-border settlements will mitigate the consequences of sanctions that lead to delays or blocking of transactions,” Aaron Chomsky, head of the investment department of ICB Fund, enters into an argument. — This leads to the diversion of working capital by companies and, as a result, additional costs with the risk of loss of solvency. Any alternatives to current payments in euros, dollars or pounds sterling reduce the likelihood of such a scenario.” At the moment, it is difficult to answer this question, what part of the business will go into crypto if everything is regulated at the legislative level: additional details are needed from the government and the Central Bank. Based on the words of Deputy Finance Minister Alexei Moiseev, it is expected that companies will open crypto wallets in authorized banks that will be able to carry out the necessary checks on the legitimacy of transactions. Rosfinmonitoring has developed an appropriate toolkit (the Transparent Blockchain system). But the question remains of what the authorities mean by cryptocurrency. It is not clear whether it will be bitcoin, or other digital financial assets, or, for example, tokenized gold, as Moiseev said, Chomsky pointed out.

“The legalization of foreign economic transactions with cryptocurrency will have little effect,” says Andrey Tugarin, managing partner at GMT Legal. – If this initiative is needed only to circumvent sanctions, then it is as easy to block an official account of Russian origin on any centralized exchange as it is to block an account in a foreign bank. If there are any other goals, the Ministry of Finance does not officially announce them.” Such an initiative will have little effect on the Russian economy, since in order to successfully influence it, there must be a working infrastructure in the field of cryptocurrencies, and we do not have this in our country yet. The transition to crypto payments could potentially be of interest to companies with a large number of cross-border transactions, but the lack of proper legislation significantly blocks such actions, the expert emphasized.