Interpreting Russia's New Legislation: Allowing Cryptocurrency for Cross-Border Transactions and Exchange Trading Starting in September
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Interpreting Russia's New Legislation: Allowing Cryptocurrency for Cross-Border Transactions and Exchange Trading Starting in September
This article will combine historical context to provide a detailed analysis of the evolution of Russia's cryptocurrency policy and explore its future development direction.
Navigating Web3 tides with focused insightsBy Aiying Aiying
On July 30, 2024, the Russian State Duma passed a law during its second and third readings, allowing the use of digital currencies in cross-border transactions and exchange trading starting from September 1, 2024, as part of an experimental legal regime (ELR). This includes cryptocurrencies such as Ethereum (ETH) and stablecoins like USDT—not limited solely to central bank digital currencies (CBDCs)—marking a significant shift in Russia’s stance toward cryptocurrencies and providing a platform to test their practical applications and risk management. Aiying Aiying will analyze, against historical context, the evolution of Russia's cryptocurrency policy and explore its future direction.
I. Origins and Initial Attitudes Toward Cryptocurrency Policy in Russia
Prior to 2017, the Russian government and central bank maintained a highly cautious stance toward cryptocurrencies. They were considered extremely risky, primarily due to concerns about their potential use in illegal activities such as money laundering and terrorist financing. The central bank repeatedly warned the public against investing in Bitcoin and other cryptocurrencies, citing their high price volatility and significant financial risks.
II. Formation of an Initial Regulatory Framework
In 2019, Russia began exploring ways to effectively regulate cryptocurrencies. The Ministry of Finance and the central bank held divergent views—while the Ministry advocated for relatively lenient regulation, the central bank favored strict controls or even a full ban on private cryptocurrencies (The Moscow Times). In 2020, Russia enacted the "Digital Financial Assets Law," which recognized cryptocurrencies as property but prohibited their use in purchasing goods and services. This marked an important step in defining the legal status of cryptocurrencies in Russia, although specific regulatory measures remained incomplete.
III. Further Developments and Policy Conflicts in 2021
Following the passage of the Digital Financial Assets Law, cryptocurrency exchanges and wallet service providers were required to register with Russian financial authorities and comply with strict anti-money laundering (AML) and counter-terrorist financing (CFT) standards. However, major disagreements persisted between the central bank and the Ministry of Finance regarding further regulation. The central bank proposed a complete ban on private cryptocurrencies, while the Ministry pushed for a more flexible approach. In 2022, President Putin intervened, urging both sides to reach a compromise and emphasizing Russia’s competitive advantages in cryptocurrency mining.
IV. Recent Policy Developments and the Experimental Legal Regime
The recently released bill ensures the operation of the ELR mechanism in the field of digital innovation within financial markets. Additionally, the Bank of Russia has been designated as the supervisory and regulatory authority for the ELR domain. The document also clarifies that in certain cases, the central bank must coordinate with the Federal Financial Monitoring Service (Rosfinmonitoring), the Federal Security Service (FSB), and the Ministry of Finance to approve ELR programs. The central bank will monitor the activities of ELR initiators to identify risks that could threaten national defense and security, as well as risks related to money laundering and terrorist financing. Upon detecting such risks, the central bank must notify the FSB and Rosfinmonitoring within no more than 10 days.
Current regulations prohibit the use of digital currencies in settling payments for goods (works, services). The new law amends this by permitting the use of cryptocurrencies as a means of payment in foreign trade activities under the ELR framework. ELR programs must clearly define participants' rights and obligations, as well as the responsibilities of foreign exchange control agencies and agents.
During the second reading, the State Duma supported several amendments, including allowing cryptocurrency exchange trading within the ELR framework. ELR programs must specify procedures for entering and exiting cryptocurrency trades, outline requirements for organizers, and define circumstances under which trading systems may conduct such transactions.
Within the ELR framework, the Bank of Russia is granted the possibility to create an electronic platform for operating digital currencies based on the National Payment System (NPS), establish its operational rules, and set requirements for its operator.
Therefore, unlike the initial version, the Bank of Russia will be able to launch three experiments starting September 1 of this year: using cryptocurrencies for foreign trade settlements, conducting cryptocurrency exchange trading, and creating an electronic platform for digital currency operations based on the National Payment System.
V. Status of the Russian Cryptocurrency Market
According to data collected by Aiying Aiying:
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Number of Cryptocurrency Holders:
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In 2024, the number of cryptocurrency holders in Russia is estimated at 3.02 million, accounting for 3.6% of the total population. This indicates that despite global adoption, cryptocurrency penetration remains relatively low in Russia.
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Exchange Data:
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Data from Exmo, one of Russia’s largest cryptocurrency exchanges, shows that trading volume on the platform reached $3 billion in 2023, a 25% increase from 2022, reflecting sustained growth in demand for cryptocurrency trading in the Russian market.
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Mining Data:
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In 2023, Russia became the world’s second-largest cryptocurrency mining country, accounting for 13% of global Bitcoin computing power, ranking just behind the United States. Russia’s mining industry benefits from abundant energy resources and a cold climate, which help reduce mining costs and improve efficiency.
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Tax Revenue:
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The Russian Ministry of Finance estimates that annual tax revenue from cryptocurrency trading and mining activities could reach 2.5 billion rubles (approximately $34 million) starting from 2023. This provides Russia with a new fiscal revenue stream, particularly significant amid international sanctions.
Under the current backdrop of international sanctions, advancing cryptocurrency policy holds great significance for Russia. Due to multiple rounds of economic sanctions imposed by the United States and its allies, Russia’s position and operations within the international financial system have been severely impacted. These sanctions—including restrictions on international transactions by Russian banks and asset freezes—have drastically limited Russia’s financial maneuverability in global markets. Aiying Aiying will continue to monitor developments in Russia’s cross-border payment market post-sanctions and innovative payment solutions aimed at breaking through these constraints. Stay tuned for updates.
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