Russia moves to regulate crypto as US sanction pressures rise

Russia is moving swiftly to regulate crypto as its companies face growing difficulties with international payments due to US sanctions over the Ukraine conflict. According to an initial report from Bloomberg, the State Duma is set to consider a crypto bill that would treat digital assets similarly to foreign currency.

The lower house of parliament will debate the cryptocurrency legislation in its second and third readings on Tuesday, alongside a separate bill regulating crypto mining. Lawmakers expect quick approval from the upper house before President Vladimir Putin signs the measures into law, potentially taking effect by September 1.

Anatoly Aksakov, head of the Duma’s financial market committee, said Russia previously had concerns about legalizing crypto but now views their use as “an objective phenomenon” that requires regulation.

Crypto Briefing reported earlier in April this year how Aksakov said that “[the] need for a ban is due to the fact that today [crypto] – is a quasi-currency that replaces the ruble in the country. But only the Russian ruble fulfills the mission of the monetary unit,” with the bill facing both opposition and support.

Mounting pressure from US sanctions

The shift comes as Russian businesses confront mounting payment pressures from US secondary sanction threats on foreign banks.

In June, the US imposed restrictions to stifle support for the Kremlin’s war on Ukraine, putting its local banks in countries that trade with Russia at a higher risk of “secondary penalties,” which delays and disrupts payments from its trading partners such as China and Turkey.

While crypto use for payments is currently prohibited in Russia, Putin recently urged officials to regulate digital assets domestically and for foreign transactions.

Crypto is “increasingly used in the world as a means of payment in international settlements,” Putin claimed in an official statement.

The Russian central bank has since softened its stance on crypto, supporting experimental use in cross-border settlements despite earlier calls for a blanket ban.

Crypto as foreign currency

Under the proposed legislation, crypto would be regulated similarly to foreign currency in Russia. However, analysts expect restrictions may limit crypto payment capabilities to large exporters, potentially excluding small and medium businesses. The Bank of Russia would serve as the primary regulator for all crypto and digital asset matters.

This rapid regulatory push highlights Russia’s efforts to navigate economic sanctions and maintain international payment channels. However, the US is likely to closely monitor services and companies used by Russia in attempts to circumvent restrictions. These legislative developments reveal the growing role of crypto in geopolitical and economic maneuvering between nations.