Russian lawmakers have recently made a shift in their approach to cryptocurrency exchanges, as reported by Russian news outlet Izvestia.
Last November, Russian lawmakers announced plans to establish a state-run crypto exchange shortly after FTX collapsed. However, the Ministry of Finance did not approve the establishment of a national crypto exchange. So instead, according to State Duma member Anatoly Aksakov, they will focus on establishing a regulatory framework for existing private enterprises.
A draft law outlining the rules is anticipated to be introduced by the end of 2023 as an amendment to the law “On Digital Financial Assets.” It will also be included in future laws.
According to Aksakov, the Russian Central Bank will oversee the regulation of these private crypto exchanges.
New regulatory framework for Russian Exchanges
The Russian authorities aim to promote competition and ensure compliance within the crypto trading sector with the new regulatory framework. Moreover, certain crypto exchanges would be permitted to facilitate cross-border payments, although Aksakov did not specify which ones.
While Russia plans to leverage crypto for cross-border settlement, using crypto for domestic payments within the country is still prohibited. Bank of Russia deputy governor Alexey Guznov cautioned against categorizing these exchanges as traditional crypto exchanges, highlighting their intended role as facilitators of cross-border transactions between exporters and importers.
Guznov proposed that private crypto exchanges could provide services like payment processing for parallel imports to support Russian businesses. Local businesses can utilize these crypto exchanges to bypass international sanctions imposed by the West due to its invasion of Ukraine last year.
Aside from that, Russia also intends to continue its research and development of new crypto platforms in response to Western sanctions.
The decision to abandon the national crypto exchange plan has been well-received by major crypto firms in the country, as the initial plan faced significant opposition since its announcement in November.
“This will help minimize the risks of sanctions and cyber attacks on infrastructure, and eliminate possible market monopolies,” said Oleg Ogienko of BitRiver, a crypto mining operation in Russia.
The new regulatory framework could signify a fresh chapter in the government’s engagement with cryptocurrencies, despite their conflicting stances toward the digital asset space in the past.
Early last year, the Bank of Russia suggested banning crypto payments, while the Ministry of Finance proposed regulations for Bitcoin. President Vladimir Putin then enacted a law prohibiting digital asset payments, but Russia later explored the use of stablecoins to circumvent sanctions.
Russia’s attempt to bypass Western sanction
Russia has been exploring various measures to mitigate the impact of sanctions imposed by Western countries over the war in Ukraine, including the development of a central bank digital currency (CBDC).
While the launch of the digital ruble was initially planned for April 1, it has been postponed to July due to the pending law approval. According to recent updates, Russian lawmakers are revising the legal framework for the CBDC to enhance foreign users’ access.
Initially, non-residents could only access the CBDC through authorized banks. However, the Committee recognized the limitations of this approach and decided to expand access to foreign banks that participate in the digital ruble platform. Non-residents will now have unrestricted transaction capabilities with the digital ruble, putting them on an equal footing with Russian residents.
Though there is no official announcement yet, there have been reports indicating that the Russian central bank is considering establishing linkages with China, India and Iran.