While Russia is pushing the idea of using cryptocurrencies for cross-border payments, it remains unclear what digital asset exactly the government plans to adopt for such transactions.
Russian authorities are highly unlikely to approve the use of cryptocurrencies such as Bitcoin (BTC) for cross-border transactions, according to local lawyers and fintech executives.
The Bank of Russia must monitor cross-border transactions
It is “highly questionable” that Russia would allow the use of Bitcoin or any other similar cryptocurrency for cross-border payments because these assets are “difficult to control,” according to Elena Klyuchareva, senior associate at local law firm KKMP.
Klyuchareva stressed that the draft amendments to the legislation on cross-border crypto payments are not yet available, while reports only indicate that the Bank of Russia and the Ministry of Finance have agreed on a common approach on the issue.
The lawyer told Cointelegraph that the cryptocurrency used by Russia for cross-border payments will likely be local, so Russian regulators can properly monitor and control such transactions. He also suggested that only major institutional players, such as banks, will be able to meet the requirements to make cross-border payments.
USDT and USDC are questionable since the stablecoins are issued in the US
According to Eduard Davydov, senior partner at Emet Law Firm, Russia should choose a cryptocurrency for cross-border settlement while removing all possible pressure from other countries. As such, cryptocurrencies issued in the United States, including major stablecoins such as Tether (USDT) or USD Coin (USDC), “will not meet these requirements,” Davydov surmised.
As the world’s most decentralized cryptocurrency, Bitcoin might seem more appropriate in this context, but BTC is also associated with a number of problems such as high volatility, limited scalability and vulnerability to global sanctions. “Entire sets of addresses can fall under sanctions when interacting with coins that will be considered ‘dirty’ and counterparties can choose not to transact with those addresses or coins,” Davydov noted.
Bitcoin seems suitable because of its decentralized nature, but the volatility is too high
Sergey Mendeleev, CEO and co-founder of InDeFi Smart Bank, also believes that decentralized cryptocurrencies like Bitcoin would only be a good option for Russia’s crypto cross-border payments if they were less volatile.
Mendeleev also said that it is difficult to imagine a situation where foreign companies would accept payments in a cryptocurrency tied to the Russian ruble. “In any case, businesses could convert any currency into Bitcoin or Tether with a single click,” he added.
The CEO also expressed hope that Russian regulators would have enough courage to allow foreign economic activity involving “at least US dollar stablecoins on major blockchains.” Mendeleev emphasized that InDeFi Smart Bank announced in September 2022 the creation of a decentralized crypto ruble project exactly to simplify this idea.
Iran is one of the few countries with a similar experience worldwide
Russia is one of the few countries in the world that allows cross-border crypto payments while banning local crypto payments along with local crypto exchanges. However, there are some countries that can serve as an example of a government taking a similar approach to crypto.
A good example could be Iran, which is under US sanctions, Davydov suggested, referring to Iran’s Ministry of Industry, Mines and Trade approving the use of cryptography for imports at the end of August. The Iranian authority said the new measures are aimed at helping Iran mitigate global trade sanctions that essentially cut the country out of the global banking system.
In August, Iran placed its first international import order using $10 million in cryptocurrency, a senior government trade official reported. However, the official did not specify which digital currency was exactly used for the transaction.
Meanwhile, Iran still does not officially allow its residents to pay with cryptocurrencies like Bitcoin. Iran’s central bank first banned the use of cryptocurrency for payments within the country in a draft of crypto regulations starting in 2019. Like Russia, cryptocurrency investment also remains illegal ·legal in Iran.
“Domestic payments in cryptocurrency are still banned in Iran. The local government has repeatedly claimed that it implemented crypto for international transactions,” Davydov said.
Related: Russia aims to use CBDC for international deals with China: report
As previously reported, the Russian government became increasingly interested in adopting cross-border cryptocurrency payments amid Western economic sanctions following Russia’s invasion of Ukraine. The Bank of Russia and the Ministry of Finance have collaborated on policies and rules to allow such payments, while the central bank stressed that cryptocurrency payments and cryptocurrency exchanges would not be legalized.
According to Anatoly Aksakov, head of the finance committee of the lower house of the Russian parliament, Russia could start cross-border payments in crypto as early as 2023. He reportedly suggested that companies themselves will be able to choose the cryptocurrency for cross-border settlements, whatever it would be Ether (ETH) or Bitcoin, or another digital currency.
