Russia Bans Crypto Payments: Report

Russia has enacted legislation that will effectively ban crypto payments according to multiple reports. The legislation was signed into law on July 14th and reportedly takes effect within ten days.

At the beginning of 2022, the Bank of Russia issued statements relaying concerns regarding crypto:

“There are potential systemic threats related to cryptocurrencies as Russian citizens’ interest in them is growing, investment amounts are considerable, and the above-described risks associated with cryptocurrency transactions are very high. As the Russian ruble is not a reserve currency, Russia cannot apply a soft approach in this area and ignore rising risks. We believe it reasonable to implement additional measures: 1. Stipulating liability for violating the ban on the use of cryptocurrency as a means of payment for goods, works and services sold and bought by Russian residents, whether legal entities or individuals.

Prohibiting the organisation of the issue and/or the issue and the organisation of circulation and exchange of cryptocurrencies (including by cryptocurrency exchanges, cryptocurrency exchange offices, and P2P platforms) in the Russian Federation and stipulate liability for breaching this ban. It is necessary to develop mechanisms for detecting transactions and persons conducting them after the ban is imposed, and mechanisms for blocking transactions carried out to purchase or sell cryptocurrency for fiat money. It is essential to determine the competent agency (agencies) responsible for the implementation of regulation measures.

Introducing a statutory ban on financial institutions’ investment in cryptocurrencies and cryptocurrency-related financial instruments, prohibiting the use of Russian financial intermediaries and financial market infrastructure for conducting any cryptocurrency transactions (purchase, payments and transfers, and alienation of cryptocurrencies) and facilitating such transactions (including custodial services or facilitating risk acceptance through derivatives).”

RBC.ru explains that the new law states:

“It is prohibited to transfer or accept digital financial assets as a consideration for transferred goods, performed works, rendered services, as well as in any other way that allows one to assume payment for goods (works, services) by a digital financial asset, except as otherwise provided by federal laws.” [translated]

Nations that have sanctioned Russia due to its unprovoked war with Ukraine have worried that digital assets may be utilized to work around these sanctions. While crypto markets are far too small for state actors, individual holders may be able to transfer value via crypto. It is unclear as to how prevalent sanction avoidance is being aided by crypto markets.

 

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