Amid sanctions, Russia considers cryptocurrencies in international payments

The Russian Federation is reportedly considering accepting cryptocurrencies for international payments in response to Western sanctions against Russia sparked by a full-scale invasion of Ukraine earlier this year.

Moscow-based Interfax and Reuters reported on Friday that Ivan Chebeskov, head of the Russian Finance Ministry’s Financial Policy Department, is actively considering the possibility of including crypto payments. "The idea of using digital currencies in international settlement transactions is being actively discussed," he said.

According to local newspaper Vedomosti, the Ministry of Finance is considering adding proposals on international payments to an updated version of the crypto law that is still under construction.

Support for the legalization of cryptocurrencies appears to come from across the Russian government. According to Trade Minister Denis Manturov, Moscow plans to legalize crypto payments “at the earliest opportunity.” In April, the Russian Ministry of Finance backed the legalization in a bill titled “On Digital Currencies.”

That same month, the head of the Central Bank of Russia admitted that the central bank was reconsidering its hostile stance on digital assets. Central Bank Governor Elvira Nabiullina said cryptocurrencies are seen as one of several measures to mitigate the impact of Western sanctions on the Russian economy.

1/ Russia cannot and will not use cryptocurrencies to evade sanctions.

Concerns that cryptocurrencies are being used to evade sanctions are completely unfounded. They fundamentally misunderstood:

- How sanctions work
- How the cryptocurrency market works
- How Putin is actually trying to ease sanctions

i will explain

— Jake Chervinsky (@jchervinsky) March 1, 2022

It is not entirely clear how Russia will use digital assets to bypass Western sanctions, given that the crypto market is not large or liquid enough to support the trading needs of a sovereign state. First, the U.S. Office of Foreign Assets Control has prohibited any U.S. person from doing business with individuals or entities on its Specially Designated Nationals and Blocked Persons (SDN) list.

There is a ban on doing business with Russian SDNs regardless of the payment system. Jake Chervinsky, head of policy at the American Blockchain Association, explained:

“There is no reason to think that the existence of cryptocurrencies will persuade any of them to knowingly violate sanctions laws, risking fines and jail time.