Russia approves crypto use in international trade

Central bank chief backs law that will help businesses get around sanctions

MOSCOW – Russian lawmakers on Tuesday passed a bill that will allow businesses to use cryptocurrencies in international trade, as part of efforts to skirt Western sanctions imposed after the invasion of Ukraine.

The law is expected to go into force in September, and Russian central bank Governor Elvira Nabiullina, one of the backers of the new law, said the first transactions in cryptocurrencies will take place before the end of the year.

Russia has faced significant delays in international payments with major trading partners such as China, India and the United Arab Emirates after banks in those countries, under pressure from Western regulators, became more cautious.

“We are taking a historic decision in the financial sphere,” the head of the Duma lower house of parliament, Anatoly Aksakov, told lawmakers.

Under the new law, the central bank will create a new “experimental” infrastructure for crypto payments. Details of the infrastructure have yet to be announced.

The law is part of a package that also includes regulations on the mining of cryptocurrencies and the circulation of other digital assets. The new law will not lift an existing ban on cryptocurrency payments inside Russia.

The central bank said that delays in payments have become a major challenge for the Russian economy, leading to an 8% decline in Russian imports in the second quarter of 2024.

Despite Russia’s efforts to switch to the currencies of its trade partners and develop an alternative payment system within the BRICS group of emerging economies, many payments are still conducted in dollars and euros and go through the international SWIFT system.

This exposes banks in countries trading with Russia to the risk of secondary sanctions, forcing them to tighten their compliance procedures.

“The risks of secondary sanctions have grown. They make payments for imports difficult, and that concerns a wide range of goods,” Nabiullina said, stressing that payment delays have led to longer supply chains and rising costs.