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Starting November 1, 2024, Moscow could use cryptocurrencies for foreign payments, despite the fact that in 2017, the Central Bank of the Russian Federation proposed their banning, calling them a "monetary surrogate". On July 30, the State Duma voted in its second and third readings in favor of legalizing crypto mining, and the pro-Kremlin media launched a series of narratives into the public space about the “monetary surrogate” turned over night into "a lifeline" for the Russian economy.
Cryptocurrencies save Russia from sanctions
"For us, cryptocurrency is a tool for circumventing sanctions," said Russian deputy Anton Gorelkin, quoted by the official website of the State Duma around the adoption of the draft law.
The idea was quickly picked up and developed by the pro-Kremlin media. The portal Ukraina.ru, which belongs to the state media trust Russia Today, writes that cryptocurrency transactions are anonymous, which, in principle, can create a space where "any sanctions will be powerless."
According to the article, what the head of the Central Bank of Russia Elvira Nabbulina called a "monetary surrogate" could help Moscow a lot at the moment. “Three Chinese banks, namely Industrial and Commercial Bank of China, China Construction Bank and Bank of China, have no longer accepted payments from sanctioned Russian banks since February. Since April, a number of Kazakh banks no longer cooperate with the Russian payment system MIR. In June Doscredobank, KICB, Mbank, Kermet bank, Komnpanion, KCR КСB Bank and Bai Tushim Bank of Kyrgyzstan did the same," according to Moscow media explaining why the Central Bank of the Russian Federation changed its view on the legalization of cryptocurrencies.
The adoption of this law was presented by the Russian propaganda as a new victory for the Kremlin over the West, whose aim is to oppress and destroy Russia. The newspaper Molodoi komsomolets and a number of Telegram channels in Russia wrote in celebration that "Russia has found a method to circumvent sanctions by legalizing cryptocurrency mining." Moscow news portals explained that the "crypto market" will be one controlled by the government, and the Russian state can ban this activity in certain regions of the country if necessary.
Russian gas and oil paid in cryptocurrencies
The talks in the Russian media about cryptocurrencies have surfaced information about past methods of circumventing sanctions (via banks in China or in former Soviet republics). At the same time, Russian journalists accuse the US of introducing additional control over sanction compliance.
Both "Molodoi komsomolets" and Ukraina.ru point out that the legalization of cryptocurrency will allow the Russian government to receive payments for gas, oil and other energy agents, evading sanctions and benefiting from the decentralized system of cryptocurrency mining.
After being signed by Vladimir Putin, the law could enter into force on November 1 and will allow foreign digital assets to circulate in Russia and Russian ones to circulate abroad. "The legislative amendments simplify the integration of Russian digital assets with those abroad," according to an analysis by the Russian publication Frank Media .
Cryptocurrencies come hand in hand with the digital ruble
Until the draft law was adopted in the second and third readings by the State Duma, the argument of circumventing sanctions was rarely mentioned in Russia. The chairman of the Financial Market Committee, Anatolii Aksakov, told the Moscow parliament newspaper Parlamentskaia gazeta that he was working on introducing amendments requested by President Vladimir Putin. He noted that Russia could become a global leader in cryptocurrency because it has cheap electricity and considerable human resources. In addition, the legalization of the crypto world will allow Russia to collect much more taxes from those who were previously illegal.
Vladimir Putin himself stressed in mid-July in a video message that Russia would invest much more in cryptocurrency mining, stressing that the digital ruble would be launched soon. Since mining consumes a lot of electricity, regulation of this field is absolutely necessary, he emphasized.
Kyiv media, worried about Moscow’s decision
Ukrainian analysts claim that Moscow studied the North Korean experience of circumventing sanctions by legalizing cryptocurrency. Pyongyang has been accused of using virtual currencies to finance various state programs and circumvent classic financial sanctions. Also, North Korean hackers attacked a record number of crypto platforms in 2023 and stole over $1 billion in crypto assets last year.
National publications in Kyiv , in unison with Bloomberg, have written that Russia's external payments in the relationship with China are already made with cryptocurrencies, using virtual assets linked to the US dollar. At the same time, the Ukrainian press is worried about new methods identified by Russia to circumvent sanctions, which means new resources needed for the war in Ukraine.
Legal cryptocurrencies – an indication of serious issues facing Russia
On the other hand, Ukrainian deputy Vadym Galaychuck, a member of the pro-presidential parliamentary group "Servant of the People" and the vice-president of the Committee for the Integration of Ukraine into the EU, wrote on his Facebook page that Moscow has legalized cryptocurrencies because of the big problems it is facing.
"Russia's economic relations with China and Turkey are still on, but a number of difficulties and barriers have emerged," the Ukrainian parliamentarian claims. He believes that the impact of the sanctions is greater than Russia's attempt to circumvent them through various political methods. "The consequences of the sanctions are obvious - the decrease in imports and the continued destabilization of the Russian consumer market," writes Vadym Galaychuk.
It is worth mentioning that Russia has been using cryptocurrencies for several years for money laundering in various states of the world, but also for the illegal financing of political parties around the world. In 2018, the legislative body of the separatist region of Transnistria , the Supreme Soviet, adopted as a matter of urgency a law that legalized blockchain activity, generating virtual currencies, and opened free economic zones with tax and energy facilities for the companies opening the so-called mining farms – farms of computers that scan the virtual space in search of cryptocurrencies.
The separatist region's affordable electricity, produced from cheap gas , has long produced cryptocurrencies, which are a form of profit for the region, but also for Kremlin-affiliated businesspeople. Crypto mining is not specific to Transnistria, it has also appeared in regions with uncertain and disputed status, such as Donetsk, Luhansk, Crimea, Ossetia and Abkhazia.
