Is Russia Warming Up to Crypto? Unpacking the Surprising Shift!
Over the years, Russia has sent mixed signals about its relationship with cryptocurrencies, but recent developments suggest a surprising shift. Is the Kremlin finally ready to embrace crypto? Let’s dive in!
The Early Days of Crypto Regulation in Russia
Up until the 2020s, cryptocurrencies in Russia danced in a gray area, where legality was anything but clear. But in July 2020, President Vladimir Putin took a significant step by signing a digital finance asset (DFA) regulation. This allowed for crypto transactions but stopped short of permitting its use as a payment method.
DFAs are now usable by banks registered with the Bank of Russia, but if you want to challenge a crypto transaction in court, you’d better make sure you can prove ownership and declare those transactions openly.
Fast forward to February 2022, when the Russian central bank released a consultation paper titled “Cryptocurrencies: Trends, Risks, and Regulation.” This document highlighted Russia’s robust mining capabilities and the active trading of crypto by Russians, yet it labeled the potential for using crypto for settlements as “limited.”
The bank warned that cryptocurrencies could jeopardize the financial well-being of Russian citizens, pushing for complete transparency in crypto transactions. They even recommended banning the creation of cryptocurrencies and exchanges, along with prohibiting financial institutions from engaging with crypto assets. Monitoring of Russian citizens’ activities on foreign platforms was also suggested, along with the proposal of a digital ruble as a legal alternative.
Unpacking the Crypto Thaw
Surprisingly, the central bank’s 2022 stance hasn’t defined Russia’s current approach to crypto. Instead of adopting a hardline stance like other nations such as China or India, the Kremlin has taken a surprisingly lenient route.
The reason behind this so-called “Crypto Thaw” is straightforward: Western sanctions have squeezed Russia, making overseas trade increasingly difficult. On December 25, 2024, Finance Minister Anton Siluanov acknowledged on Russia 24 that Russian companies are turning to Bitcoin for international trade, and President Putin has no intention of stopping this trend. In fact, he signed legislation legalizing the limited use of crypto for international trade in the summer of 2024.
While Russian companies and individuals can now mine, buy, and sell crypto starting November 1, 2024, the use of crypto as payment within Russia is still a no-go, and you won’t see any crypto ads around.
Bitcoin Mining: A Strategy Against the Dollar
While crypto is often celebrated for its independence from government control, Russia’s embrace of it has deeper motives. For years, Putin has championed de-dollarization, and crypto has become an unexpected ally in this campaign.
The U.S. dollar has dominated global trade, accounting for more than half of foreign transactions, but as the U.S. pushes for Bitcoin’s prominence, it could inadvertently weaken its own currency. Some experts argue that the more Bitcoin is utilized, the more it undermines the dollar’s power. As Russia pivots to Bitcoin for foreign trade, it stands to gain while the dollar may take a hit.
Moreover, Russian oligarchs, like aluminum and energy tycoon Oleg Deripaska, have also thrown their weight behind crypto. His aluminum factory was transformed into a mining farm back in 2019, demonstrating a keen interest in capitalizing on this digital gold rush.
Final Thoughts
Has a true Crypto Thaw emerged in Russia? It appears so, but let’s not get ahead of ourselves—it’s more of a fleeting thaw rather than a full-blown spring. Much like the Khrushchev Thaw of the past, it offers a moment of reduced tension and new opportunities for some. Only time will reveal what the future holds for crypto in Russia.
