Russia warms to crypto in rapid about-face

Just a few months ago, Kremlin bureaucrats were as cold to the idea of ​​cryptocurrencies as winter in Siberia.

Then came the invasion of Ukraine and sanctions from a wide range of countries that crippled Russian access to the World Bank system. Suddenly, an anonymous, inexpensive method of making payments across international borders and one that also threatened the dollar’s privileged position as the world’s reserve currency stopped seeming like such a bad idea.

Now Moscow is actively moving to crypto, planning a digital ruble early next year as it seeks to modernize its financial system and increase its influence in the global financial system. Meanwhile, the EU has other ideas and last week tightened restrictions on Russia’s cryptocurrency presence.

“The topic of digital financial assets, the digital ruble and cryptocurrencies is currently intensifying in society, as Western countries introduce sanctions and create problems for bank transfers, including in international settlements”, said Anatoly Aksakov, head of the Russian Duma’s finance committee. quoted by Reuters like telling a parliamentary newspaper.

“If we launch this, other countries will start using it actively in the future, and US control over the global financial system will effectively end,” Aksakov added.

Deputy Finance Minister Alexei Moiseev said earlier last month that the Russian central bank has agreed to plans to legalize crypto for cross-border payments.

“But now the US is increasing the sanctions,” says Omid Malekan, an assistant professor who lectures on blockchain and crypto at Columbia Business School. “This creates an incentive for countries to try to find an alternative currency to trade it for things like cross-border trade, because then you’re no longer at the mercy of US economic sanctions.”

This change comes after the country sought a complete ban on cryptocurrency operations including trading, issuing and mining in January. Then, in July, President Vladimir Putin signed a bill banning the use of cryptocurrency as a means of payment for domestic goods and services.

In an effort to frustrate Russian efforts to maintain a place in international finance, the EU will not allow its citizens to hold assets in EU cryptocurrency wallets. But it could be an empty threat.

“If it’s a non-custodial wallet like Metamask, that’s a nonsensical statement, every user does it locally on their own device and can do it from anywhere. We can’t know where they are physically located,” says Malekan. “If it’s a custodial wallet, the holder of the asset is know-your-customer.”

Moscow is reportedly showing its newfound appreciation of cryptocurrencies in other ways. It plans to provide power to power-hungry crypto mining farms in neighboring Kazakhstan, with power monopoly Inter RAO dealing directly with companies in the former Soviet republic, Bitcoin.com quoted Russian business information portal RBC as sayingRY
as if to say.

Meanwhile, pro-Russian groups are using cryptocurrency to raise funds for war operations via the encrypted messaging app Telegram, Chris Janczewski of TRM Labs said on CNBC. He stated that $400,000 had been raised since Russia invaded Ukraine in February, and that amount was likely to rise.