Russia, a major center of cryptos, bans them to pay

A new Russian law further strengthens the ban on making cryptocurrency payments. The country has an ambivalent stance on digital assets.

The use of cryptos was already very limited in Russia — but that was still not enough. Vladimir Putin signed a new law on Thursday, July 14, 2022, which further regulates the use of digital assets in the country and prohibits payments in cryptocurrencies.

There had already been regulations prohibiting payments since January 2021, but as Blockwork reported on July 15, Russian MPs allegedly considered that it was “not not enough “, given that it prohibited only the ” payment tokens “.

The new law, which will bring more precision and more firmly regulate crypto exchanges, must come into action on July 25, according to Siècle Digital.

In Russia, it is impossible to use cryptocurrencies to pay. // Source: Canva

Cryptos are not prohibited, only payments

Blockwork states that the ” NFT, security tokens and utility tokens are now prohibited as means of payment by the new law. These tokens are particular forms of transactions on a blockchain, which are used to make investments in companies. As they were not expressly cited in the previous law, they could have been used to circumvent the ban. This will now be impossible.

Cryptocurrencies, like NFTs, are not completely banned in Russia, unlike what happened in China. It is therefore always possible to buy bitcoin or Ethereum – even if it is necessary to do the transactions in ruble – and to invest in blockchains.

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Only rubles are accepted for payment. // Source: Canva

This decision is surprising to say the least: since the start of the war in Ukraine, Russia seemed to want to use cryptocurrencies as a tool to avoid economic sanctions imposed by the United States and European countries. The central bank had considered, in May, to authorize international payments in crypto-currencies, in order to help foreign trade. In October 2021, Vladimir Putin himself said that cryptocurrencies had “ of interest », and that they could eventually be used as a means of payment.

Russia has an ambivalent stance on cryptocurrencies

This reversal of the situation is all the more surprising since Russia is a major center for cryptos. The country hosts a large number of bitcoin miners, which makes it the 5th largest in the world in terms of hashrate (computing power), according to data from the University of Cambridge. It is above all one of the countries where crypto-assets are most used by the population: according to a study by Chainalysis, cited by the Financial Times, Russia is in the top 20 worldwide, and the 3rd country that sends more money abroad by cryptocurrencies.

Russia is therefore blowing hot and cold on the entire sector. This is largely due to the disagreement between Elvira Nabiullina, the president of the Russian central bank, who is strongly against cryptos, and Anton Silouanov, the finance minister, who is in favor of them. The country’s two financial authority figures have very different views: in February, the central bank wanted to completely ban digital assets, including their mining, while Mr Silouanov had tabled a bill to legalize and regulate their use.

Since then, the bill seems to have stalled, and the signing of the new law suggests that the president of the central bank has, for the moment, won her case.