Russia next week will begin testing the use of cryptocurrencies for cross-border payments as a way to circumvent international sanctions.
The bill allowing international payments using digital currencies was passed in late July and subsequently approved by President Vladimir Putin, but it has not changed anything within Russia: cryptocurrencies still cannot be used as legal tender for regular domestic transactions.
The plan seeks to ease harmful sanctions imposed on Russia following its invasion of Ukraine in February 2022. Led by the United States, Britain, the European Union, Australia, Canada and Japan, more than 16,500 sanctions have been imposed, significantly impacting the Russian economy.
Nearly half of Russia’s foreign exchange reserves, worth around $332 billion, are said to be frozen, including up to 70% of the assets in the Russian banking system. Some Russian banks have also been removed from the SWIFT platform, the international banking system.
Reports about Russia’s state-run cryptocurrency trading platform
Policy experts were reported on Friday (August 31) to have said that attempts to circumvent international sanctions using cryptocurrencies may not be successful. Coindesk.
“It is difficult for Russia to circumvent US dollars and euros via the SWIFT system, increasing the risk of secondary sanctions,” said Valerie Kennedy, research director at blockchain analytics firm Chainalysis.
Secondary sanctions are in place to act as a deterrent to prevent third parties from conducting trade with the sanctioned country.
A cross-border payments experiment giving discretion to Russia’s central bank is on the horizon, while the Russian Stock Exchange has denied reports that it is preparing to launch a state-run cryptocurrency trading platform.
While the major exchanges in Moscow and St. Petersburg claim to be focused on the main financial and stock markets, the Republic of Tatarstan is looking at regional opportunities. A domestic cryptocurrency exchange platform is said to be ready and waiting with the support of the relevant regional authorities.
Image credit: Ideogram
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