Russian gov’t shelves plan for national digital currency exchange

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Six months after unveiling plans to launch a national digital currency exchange, the Russian government has ditched the idea for a simpler strategy to bypass Western economic sanctions.

Anatoly Aksakov, head of the State Duma Financial Markets Committee, told local news outlet Izvestia that the government will proceed with regulating multiple platforms. Aksakov disclosed that the initial plan of a unified digital currency platform hit several stumbling blocks, including opposition from the country’s Finance Ministry.

Going forward, authorities will float new rules to regulate the operations of new digital currency exchanges in the country as it searches for new avenues to circumvent its sanction. Aksakov posits that the exchanges will be used to settle cross-border transactions, and if they are restricted, new platforms will take their place. 

Russian authorities are banking on the fact that since digital currencies are borderless, they will be impervious to sanctions but come with the drawbacks of privacy. While privacy-focused digital assets may be used, Aksakov notes that the new rules will prevent their widespread usage to avoid bad actors from exploiting them.

Under the new plan, the central bank is tipped to regulate the new exchanges, but the bank’s deputy governor Alexey Guznov said the entities would not operate as exchanges. Guznov clarified that the entities would most likely serve as institutions to promote interaction between exporters and importers to settle international transactions.

The previous plan of a national digital currency exchange drew criticisms over its infrastructure risks and antitrust issues. Privacy issues and government surveillance concerns form part of the barrage of attacks against the proposed national exchange platform.

“The concept of a single national crypto exchange in Russia was never going to be accepted by the crypto community in Russia,” Lesperance & Associates founder David Lesperance told one news outlet. “Why use a national crypto exchange when a world of alternatives was just a VPN away?”

Manic push to circumvent sanctions

Since its invasion of Ukraine and the response of Western powers, Russia has tinkered with several strategies to circumvent its economic sanctions. The Finance Ministry and the central bank suggested using block reward mining to conduct international payments within an experimental legal framework.

As the sanctions bit harder, the government turned to central bank digital currencies (CBDCs) to resolve its predicament. The new effort sees the legislature scramble for new rules to guide a digital ruble pilot poised to focus on cross-border functionalities.

Watch: The History of Money and The Future of Bitcoin at CoinGeek Zurich