After anticipating the turn of events for some time, the dice are finally rolled. Earlier this week, Russia launched a massive invasion of neighboring Ukraine after months of escalating tensions. The crypto market reacted violently and the Bitcoin (BTC) value fell. Many are now awaiting tougher sanctions to be announced by the West. However, according to experts, it could be that Russia will largely use crypto to circumvent these sanctions.
Russia and sanctions
With Ukraine’s unprovoked invasion, it is almost certain that Russia will become the target of far-reaching sanctions from the West. These sanctions would try to isolate Russia from the rest of the world, and the financial sector in particular would be hit hard.
Both the European Union, the United Kingdom and the United States have already announced their first new round of sanctions, which will go much further than before 2014 after Russia’s annexation of Crimea. President Vladimir Putin is not surprised though, and the Russian government has so far expressed little concern.
“Russia has a lot of time to think about this particular outcome. It would be naive to think that they didn’t quite fix this scenario.”
legalize crypto
Last Monday, days before the Russian Finance Ministry invaded Ukraine, presented a draft cryptocurrency regulation bill.
The draft maintains the current ban on crypto payments for goods and services, places a limit on the number of rubles that people can invest in the cryptocurrency, and imposes limits on crypto mining.
The Russian crypto market was valued at over $200 billion at the beginning of February, accounting for about 12% of the global market. According to the Russian government, 5 billion worth of transactions are conducted using cryptocurrencies in the country every year, and a population of 144 million holds approximately 26.5 billion worth of cryptocurrencies.
On January 20, the Russian Central Bank called for a complete ban on cryptocurrencies in Russia, but it has not come to that. President Putin also joined the discussion. He acknowledged the risks of investing in cryptocurrency, but that central banks should not stand in the way of technological progress. Finance Minister Anton Siluanov expects the law to come into force by the end of 2022.
crypto in russia
This may have to do with the fact that Russia has an asset that allows the country to largely negate Western sanctions. According to the New York Times report, this asset has nothing to do with the crypto industry.
“When the United States banned Americans from doing business with Russian banks, oil and gas developers and other companies after the country’s invasion of Crimea in 2014, the blow to the Russian economy was sharp and heavy. Economists estimate that sanctions imposed by Western countries cost Russia $50 billion annually. Since then, the global market for cryptocurrencies and other digital assets has exploded. This is bad news for those imposing sanctions and good for Russia. There’s news.”
According to experts, it is inevitable that Western sanctions will be absorbed by the use of bitcoin and other cryptocurrencies. Because cryptocurrencies are borderless, this can ensure that Russia can exit all sanctions fairly easily.
crypto ruble
Another avenue that Russia is exploring is the launch of its national cryptocurrency called CryptoRuble. Putin’s economic adviser Sergei Glazev suggested that introducing the currency would help stave off Western sanctions when the plans were first announced.
The new digital currency will actually be nothing more than a digital version of the ruble. The government prefers to have its own cryptocurrency which cannot be mined. In addition, the Russian government may closely monitor the use of the currency.
Earlier, Deputy Finance Minister Alexei Moiseev and Russian Central Bank Deputy Governor Olga Skorobogatva indicated that they see no need for this cryptocurrency to arrive. However, given the current situation, the opinion of the authorities may take a turn and accelerate the development of CryptoKitties.
Plans before 2015
This topic was discussed extensively in 2015. At the time, payments provider Qiwi had already hit upon the idea of launching a national Russian cryptocurrency. The Kiwis then talked about the bitrubber.
Russia has an official working group that is currently investigating what the potential risks of this launch could be and what kind of regulation should be introduced if the plan goes ahead.
In the past, there have been reports of cryptocurrencies being banned. Today, the stance seems to have reversed, as it leans more towards regulating digital currencies.