Key Takeaways
- Russia recently passed legislation creating an experimental regulatory regime recognizing local companies’ use of cryptocurrencies for foreign trade settlements.
- Speaking to the news outlet Russia 24 TV, the country’s finance minister, Anton Siluanov, confirmed that firms have already begun utilizing locally-issued Bitcoin and other crypto assets for international settlements to circumvent Western sanctions.
- Russia was booted out of the SWIFT banking network and imposed hefty financial sanctions by the U.S. and its Western allies for its invasion of Ukraine, which has led to several international banks refusing transactions from the country fearing scrutiny.
- Despite promoting the use of cryptocurrencies, the Kremlin has imposed a six-year restriction on Bitcoin mining in certain regions that face energy concerns. The ban effective on January 1, 2025, will run until March 15, 2031.
Russian companies have begun using Bitcoin and other cryptocurrencies for international payments following a legislative change that allowed them to utilize the assets to circumvent financial sanctions imposed on Moscow by the U.S. and its Western allies. The country’s finance minister, Anton Siluanov, confirmed this.
Russian Companies Are Settling International Trade In Bitcoin And Other Crypto, Confirms Finance Minister
Sanctions have complicated Russia’s trade with its global partners, particularly China, India, and Turkey. Since the country invaded Ukraine, it has been on the receiving end of hefty financial sanctions by the West, which has discouraged international banks from settling any trade transactions from Russia to avoid scrutiny.
Last month, President Vladimir Putin signed an experimental legal regime recognizing cryptocurrencies as property in foreign trade settlements. The legislation also exempts crypto mining and the sale of crypto assets from a value-added tax (VAT).
Speaking to Russia 24 TV, Siluanov said that the government will permit the use of cryptocurrencies mined in the country for foreign trade transactions. He noted that such transactions were already happening and the program “should be expanded and developed further”. The finance minister added that international payments in digital currencies represent the future.
Speaking at an investors’ conference earlier this month, Putin criticized the Biden administration for weaponizing the dollar and abusing its role as the global reserve currency by using it for political purposes. He highlighted that the move has forced many countries, including Russia, to turn to alternative assets like cryptocurrencies.
The President specifically talked about Bitcoin, stating that it cannot be regulated by any financial institution or government. He described the asset class as a tool to enhance economic efficiency and stability. The remarks indicated that Putin backs the use of cryptocurrencies for cross-border transactions.
Russia Limits Bitcoin Minings In 10 Regions Until 2031 To Address Energy Concerns
Despite promoting the adoption and use of cryptocurrencies, Russia’s approach comes with certain limitations. On Christmas day, local media outlet Tass reported that starting January 1, 2025, there will be a six-year regional ban on Bitcoin mining to address energy concerns in ten regions. The ban will remain in place until March 15, 2031.
As per the report, the regions of Dagestan, Inhushetia, Kabardino-Balkaria, Karachay-Cherkessia, North Ossetia, Chechnya, Donetsk and Lugansk, and Zaporizhia and Kherson will be affected by the decision. However, the restrictions will only apply during peak energy consumption periods within these areas.
The restrictive period will run from January 1 to March 15, 2025, and from November 15 to March 15 in subsequent years.
Kremlin stated that the ban prohibits cryptocurrency mining and participation in mining pools in the designated areas. Officials also highlighted that the country’s energy regulator will adjust the list of regions to address the country’s evolving energy demands. The mining ban is in response to local electricity shortages and the growing burden of unpaid energy bills. The government aims to curb power imbalances while allocating resources more effectively and efficiently.
Previously, Russia’s deputy minister of energy, Yevgeny Grabchak, noted that certain areas in the far east and southern regions of the country, as well as southwestern Siberia, lack the necessary infrastructure to support large-scale Bitcoin mining operations. He expects these challenges to persist until 2030 at the least.
The restrictions on crypto mining follow Russia’s recently implemented crypto tax framework, which signals a border effort to regulate the sector. The new law enforces compliance with tax policies for cryptocurrency-related activities.
At the time of writing, Bitcoin (BTC) is trading at $98,160 – up 0.05% in the last 24 hours.
