Russia reconsiders stance on use of digital assets after past prohibitions

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Russia’s central bank appears to soften its stance on its citizens’ use of virtual currencies for cross-border payments. The Bank of Russia stated that it was necessary to consider digital assets for cross-border payments, given the current geopolitical conditions in the region.

Russia has been embroiled in military conflict with Ukraine since February, forcing Group of Seven (G7) countries to respond with sanctions. On top of this, Moscow was threatened with being kicked out of international payments system Society for Worldwide Interbank Financial Telecommunication (SWIFT), making settlements of foreign transactions difficult for citizens.

Given the current climate, the Bank of Russia and the Ministry of Finance are turning towards virtual currencies with plans to legalize their use for cross-border transactions, according to local news agency TASS. Deputy Finance Alexey Moiseev told Russia-2 TV that both institutions have agreed that “it is impossible to do without cross-border settlements in cryptocurrency.

“I can say that the central bank has also rethought [the approach], taking into account the fact that the situation changed, and we are rethinking it,” Moiseev said.

He added that in the process of conferring legal status on digital assets, special care should be taken to prevent its misuse by bad actors in money laundering and drug trafficking. Moiseev affirms that the current regulatory regime must be improved to accommodate the legalization.

The deputy minister remarked on the trend of Russian citizens using foreign platforms to trade digital assets, arguing that it is necessary for the entities supervised by the Central Bank to be in charge of the process to ensure total compliance with anti-money laundering requirements.

A series of bans for virtual assets in Russia

In the past, Russia’s government has not hidden its dislike for the asset class and has passed several pronouncements outlawing their use. In 2020, the country passed a groundbreaking “Digital Financial Assets” law that banned digital currencies as a payment mechanism.

Last year, the country had widespread optimism that the asset class would be legalized, but President Vladimir Putin dashed the high hopes. He described them as being premature for trading commodities like oil and gas.

Tighter sanctions pushed the Ministry of Industry and Trade to announce the legalization of digital currencies in local payments soon but stressed that Russia’s legislative houses have to wade through the murky waters of a regulatory framework first.

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