Throughout the years, Russia has been sending conflicting signals over its relationships with cryptocurrencies. Lately, the Kremlin seemingly started to embrace crypto. Is this actually the case?
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Early crypto regulations in Russia
Until the 2020s, cryptocurrency in Russia had effectively existed in a gray zone. In July 2020, President Vladimir Putin signed a digital finance asset (DFA) regulation that allowed crypto transactions while prohibiting residents from using crypto as a means of payment.
DFAs can be used by the banks registered with the Russian central bank, known as the Bank of Russia. Challenging crypto transactions in court is possible only if crypto possession is maintained and the owner declares the transactions.
In February 2022, the Russian central bank released a consultation paper called “Cryptocurrencies: Trends, Risks, and Regulation.” It mentions Russia’s leading role in mining capacity and the fact that Russians actively trade crypto. Also, the paper calls the potential for the use of crypto for settlements “limited,” even in the long run.
According to the Bank, cryptocurrencies threaten the well-being of Russians, so ensuring full transparency of crypto transactions was a must. The paper called to ban the creation of cryptocurrencies and crypto exchanges, prohibit financial institutions from investing in crypto or associated assets, and ban mining altogether.
Additionally, the central bank urged the government to monitor the activity of Russian citizens on foreign cryptocurrency platforms. The consultation paper mentioned the ongoing development of a digital ruble as a possible legal alternative to cryptocurrencies.
The reason behind the Crypto Thaw
It’s safe to say that the 2022 consultation paper didn’t shape modern-day Russia’s relationships with cryptocurrency. Despite the recommendations from the central bank, the Kremlin took a path that was not the restrictive approach typical for Russian strategic partners like China, Iran, Turkey, Belarus, or India.
Read more: India weighs crypto ban as it pushes for digital rupee adoption
The surface reason for this “Crypto Thaw” is simple: Russia became more favorable towards crypto as the Western sanctions narrowed the space for overseas trade.
On Dec. 25, 2024, in an interview on the TV channel Russia 24, Finance Minister Anton Siluanov admitted that Russian companies increasingly use Bitcoin for international trade, and Putin is not going to hurdle this process. The Russian president actually signed the legislation that legalized the limited use of crypto for international trade back in the summer of 2024. The act allowing Russian companies and individuals to mine, buy, and sell crypto was signed in August and commenced on Nov. 1, 2024. Using crypto as a means of payment within the country is still prohibited, though. Advertising crypto is also not allowed.
However, the need for sanctions bypass is not the only reason for the friendlier approach to crypto.
Bitcoin mining, dollar undermining
Crypto is famous for its independence from governments, but that’s not the only reason why the Russian government resorted to using this asset that its strategic opponents cannot block.
For years, Putin has been a consistent proponent of de-dollarization and cryptocurrencies, which he didn’t like at first, but it turned out to be what he needed. The American dollar is the backbone of global trade (over half of the foreign trade is made via USD) and the world’s reserve currency. But now, when the U.S. government is seeking to make Bitcoin stronger, the American dollar may face troubles.
Some experts warn that in the USA, Bitcoin can be made stronger only at the expense of the USD power. So, Bitcoinization of America is de-dollarization. More than that, foreign trade made via Bitcoin instead of USD (that’s what Russia is doing right now) is playing against the dollar. As USD is not Russia’s national currency, the Kremlin doesn’t lose more than America when it brings more bitcoins to the game, as bitcoins harm the dollar more than the ruble. American efforts to create a strategic Bitcoin reserve may only make the situation worse for the American dollar. Ukraine has already called to block the use of bitcoins by Russia in international trade.
Read more: Ukraine promises sanctions over Russia’s use of Bitcoin in foreign trade: report
Another possible reason why the government chose to use the potential of cryptocurrencies is the support of the sanctioned tycoons. One of them is aluminum and energy oligarch Oleg Deripaska. His aluminum factory, Rusal’s facility, was turned into a mining farm back in 2019. The enterprise is called the Russian Mining Company. It was co-founded by the Russian official Dmitry Marinichev, who estimated the RMC mining capacity to be 20% of the global Bitcoin mining output.
RMC was mentioned in the media only once, and it is not the only crypto mining company that has ties with Deripaska. BitRiver is called the biggest crypto mining enterprise, and there is no evidence that BitRiver is the same company as RMC. However, the RMC co-founder Marinichev was called a deputy communications director in BitRiver.
BitRiver was sanctioned by the U.S. Treasury in 2022. The BitRiver CEO Igor Runets noted that BitRiver has no ties with the Kremlin and that the sanctions had solely a competitive motivation. Bloomberg points out that Deripaska, who is close to the Russian government, played a notable role in founding BitRiver and providing the facility for mining equipment in Bratsk, a city in Siberia whose cold climate fits the mining operation nicely. The power supply for BitRiver was provided by the energy company En+, one of Deripaska’s key assets.
Final thoughts
Has a Crypto Thaw come to Russia? It seems so. But the thaw is far from being summer or spring. Rather, it is a short defrosting period, a time for hope. Like the Khrushchev Thaw, it is a time when the pressure gets weaker, and new opportunities for elites and some individuals come. Time will show what’s next.
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