Russia is stepping up sanctions-evading measures to keep its international trade flowing. The country is passing new laws regulating cryptocurrency and a plan for the digital ruble.
On Tuesday, Russia's State Duma — the lower house of Russia's federal assembly — passed a bill that would let businesses use cryptocurrencies in international trade, Reuters reported.
Under this new law, Russia's central bank will create a new "experimental" payments platform. Russian central bank governor Elvira Nabiullina said the first transactions are expected by the end of this year, per Reuters.
Nabiullina also said on Tuesday that the Russian central bank plans a mass introduction of the digital ruble in July next year, per TASS.
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Digital currencies, like the digital ruble, are similar to cryptocurrencies but are issued and backed by central banks.
Some Russian businesses are already using crypto
In addition, Russia passed new regulations legalizing crypto mining on Tuesday.
An existing ban on crypto payments in Russia remains, but Moscow's greenlighting crypto for international trade marks a significant shift.
In January 2022 — before the full-scale invasion of Ukraine — Russia's central bank proposed a ban on the use and mining of cryptocurrencies within the country, citing risks to financial stability and monetary policy.
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However, the heavily sanctioned country is facing so many issues with international payments that it has been forced to shift its position.
Some Russian businesses are already using cryptocurrencies to trade with settlements done via Hong Kong, but through central Asian intermediaries, Bloomberg reported last week.
Russian President Vladimir Putin himself said earlier this month that Russia had to "seize the moment" to create a legal framework for digital assets, as they are being increasingly used to settle international payments.
Russia's tilt toward crypto isn't unexpected. Analysts have been speculating about howRussia would eventually movetoward using crypto and digital assets following sweeping sanctions over its invasion of Ukraine.
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Increasingly tight Western sanctions hit Russia's international trade
Until recently, Moscow hasn't really had to look into digital currencies that intently — since Russian companies have managed to keep on doing business using non-US dollar currencies, such as the Chinese yuan, or via smaller banks.
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But Russia's international trade is getting ever more difficult.
The troubles started in December when the US authorized secondary sanctions targeting financial institutions that help Russia skirt sanctions.
This prompted global banks from China to the UAE, Turkey, and Austria to reduce transactions — even in non-US dollars — with Russia to avoid getting in the crosshairs.
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"This episode demonstrates the global power of the US Treasury, causing banks from Turkey to India and China to pause the processing of payments invoiced by or to Russian counterparties," wrote Christopher Granville, the managing director of global political research at GlobalData TS Lombard, in a May note about digital currencies and dedollarization.
"In other words, simply settling commercial invoices in national currencies rather than US dollars turns out to be an insufficient counter to US sanctions," Granville added.
The payment issues were exacerbated last month when the US Treasury rolled out a new package of expansive US sanctions against Russia, forcing the Moscow Exchange — Russia's key bourse — to halt dollar and euro trade.
Russia could be eying a digital-currency-based settlement system
It isn't clear how Russia's crypto and digital currency regimes will shape up.
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Implementation may be easier said than done.
Even China, which has one of the world's most advanced digital currencies, relies on a "two-tier" system involving banks as wallet-holding agents. Granville wrote in May that that setup avoided excessively disrupting the operations of banks, which could threaten broader financial stability.
