Russia is preparing to approve international crypto payments, but those involved in the industry suspect this would allow the country to circumvent sanctions. At the same time, the United States has recently tightened the noose with new legislation in Congress targeting the use of cryptocurrencies to dodge financial regulations imposed by the West.
Russian crypto experts claim that evading sanctions with cryptocurrencies is a “great illusion”
This week, Russian authorities announced that they have begun developing a mechanism for cross-border payments in crypto assets with the aim of reducing sanctions pressure on the Russian economy and trade. The Ministry of Finance said that legislation legalizing such transactions has been agreed upon with the Central Bank of Russia.
Moscow is now rushing to adopt regulations on the issuance, circulation, and various operations with digital currencies, especially payments for imports and exports restricted by Western sanctions against the invasion of Ukraine. Meanwhile, the U.S. House of Representatives has approved a new bill containing measures aimed at curbing the evasion of the use of cryptocurrencies.
Against this backdrop, experts familiar with the industry exchanged views with Russian media on how practical it is to circumvent sanctions with the help of cryptocurrencies. The crypto page of the Russian business news portal RBC summarized them in an article titled starting with the expression “Great Illusion.”
According to Maria Stankevich, director of development at the digital asset exchange Exmo (Exmo.com), the introduction of a crypto payment system under sanctions is indeed a great illusion. She recalled that many state-owned companies were discussing this option back in 2014 during the previous sanctions adopted after Russia’s annexation of Crimea.
This is not the first time Russia has turned to cryptocurrencies for payments
Tomashevskaya & Mikhail Zhuzhzhalov, a senior attorney at the law firm, agreed with the idea of a crypto executive. Partners Law Firm agreed with the Crypto Executive that the idea of overcoming financial obstacles with the help of crypto is not new: in 2018, the Russian authorities were considering allowing international companies established in the country’s special administrative regions to use digital coins in payments with their partners. The proposal was considered but rejected by regulators, who were very negative at the time.
Regulatory pressure usually falls on institutional investors such as cryptocurrency exchanges, peer-to-peer platforms, and issuers of digital and tokenized assets, Zhuzhzhalov noted. While the distribution of cryptocurrencies itself is not regulated, it is easy to target legally operating licensed companies, he noted and emphasized.
If such market participants are subject to unfriendly jurisdiction, they are obligated to comply with sanctions. Also, if they are located in a neutral country, they may be pressured by secondary sanctions, as was recently the case with Turkish banks.
Two of Turkey’s five financial institutions have decided to suspend operations in partnership with Russia’s MealCard, a payment system widely used by Russian tourists visiting the country. The move follows clear indications earlier this month that Washington may impose sanctions on countries that do business with Mir. According to local Turkish media reports, a new Turkish-Russian settlement system is being prepared.
It is almost impossible to hide large volumes of transactions, and Maria Stankevich admits that anyone who still wants to work with Russia using cryptocurrency will be placed under sanctions. The number of people who choose to continue doing so will dwindle, she believes. Tracking crypto transactions is even easier than bank transfers, Stankevich added. She concluded, “In the current situation, we have to accept that our interaction with the West will be limited.”
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