Russia legalizes Bitcoin and cryptocurrency mining

Russia’s stance on blockchain technology, cryptocurrency, and mining has been pretty much under the radar. It has not explicitly stated that it considers the technology illegal, but all the laws that have been implemented regarding it have shown considerable caution from Russia.

For starters, when President Putin signed a regulation on Digital Financial Assets (DFA) in 2020, it only legalized transactions online between crypto owners. Still, it prohibited the use of cryptocurrency to trade local goods and services. It also required that any exchange or Russian bank partner that wanted to operate DFAs register with the central banking authority, which is the Bank of Russia, giving the central authority the full right to supervise the DFA operators and access their books, systems, and entire operations.

This was in a bid to ensure smooth running and prevent money laundry, the same way crypto owners (individuals and institutions) with transactions exceeding 600,000 rubles ($7,757) were required to give a detailed account of all their crypto transactions to the Russian tax authorities and coupled with the fact that crypto exchanges and miners had to provide a breakdown of all their activities in the calendar year to the Federal Financial Monitoring Service Rosfinmonitoring.

The above is evidence of Russia’s intent to welcome the global phenomenon of cryptocurrency, but the regulations surrounding it might seem stifling and restricting to people in the region who believe that there’s more room to be had and that crypto can offer much more.

However, the era of sitting on the fence is over from the Kremlin as it has recently taken pro-crypto stances that legitimize Bitcoin and crypto mining more directly than ever before. This news comes on the back of the trade sanctions that have been levied against Russia by the European Union (EU). Experts have described these sanctions as “massive and unprecedented.” These sanctions target thousands of people in Russia, and they include travel bans, asset freeze, unavailability of their funds, and extend to nations that are seen to have aided or supported Russia in any way; some of these countries are Belarus, Iran, and North Korea. These sanctions aim to weaken Russia’s base, and the use of cryptocurrency is seen as the silver bullet to bypass most of these restrictions and continue trade with their partners globally without any hindrance.

Amidst all the unrest in the region and while crypto users would have preferred the crypto adoption was implemented in much calmer and simpler times, the ability to access crypto more freely will still be regarded as a silver lining for many that access to this technology will ease their day to day. With all the sanctions not only affecting Russia, the party, and office holders in the region, the offshoots can impact the quality of life of the average person living in Russia. Being able to access financial services made possible with the use of smart contracts, underpinned by blockchain technology, the ability to take time away from the unrest to access a crypto casino licensed offshore with the use of VPN tech, access NFTs and other blockchain services is sure to alleviate the impact of these sanctions.

It is important to note that Russia’s stance is in no way rushed or desperate, as these new regulations that will surround cryptocurrency have been carefully thought out and designed to ensure user safety. Many stopgaps have been put in place to ensure that people can not take advantage of the system. These include the yearly reports mentioned earlier, the need for DFA operators to register with the central banking authority in Russia, educating the public on the use and dangers associated with using the technology, and ensuring that miners do not take advantage of the relatively cheaper energy tariffs in Siberia with adequate tax and energy accommodations in the new law.

The use of cryptocurrency to navigate the EU’s sanctions on Russia did not come in a vacuum. Venezuela, which trade sanctions by the United States have also hit, is experimenting with Tether (USDT), a stable coin pegged to the US dollar to facilitate its sale of oil and prevent its revenue from oil sales from being frozen if it proceeds to use the US dollars to complete the trade. This is what the Iranian and Russian central banks are trying to achieve, with a similar arrangement being experimented with by Belarus and China.

Russia aims to integrate cryptocurrency into its financial system without leaving any holes for fraud, without undermining its local currency or creating any form of destabilization, as evidenced by an excerpt of one accompanying draft document that reads:

“The establishment of rules for the circulation of cryptocurrencies and control measures will minimize the threat to the stability of the financial system and reduce the use of cryptocurrencies for illegal purposes since a complete ban on the segment of operations related to their circulation is impossible.”

In summary, it is clear that Russia has experienced a massive shift in its attitude towards cryptocurrency and blockchain technology. It appears to have been born from a need to escape the sanctions imposed on the EU on Russia as a country and some of the individuals with authority in the region. Frozen assets and travel bans have created a need to access funds without destabilizing Russia’s financial system, and crypto adoption seems to have provided the necessary answers. While seemingly urgent, it does not come off as a desperate last-ditch attempt as crypto, mining, and blockchain services are being carefully ushered in in a way that does not negatively affect Russians living in the region.