Russia prepares for total crypto ban as geopolitical tensions rise

Russia is banning crypto to reinforce ruble as geopolitical tensions and sanctions spread.

Russia will enforce a strict ban on the general circulation of crypto assets such as Bitcoin, allowing only digital financial assets issued within its jurisdiction. This initiative, led by Anatoly Aksakov, Chairman of the State Duma Committee on the Financial Market, is part of a broader governmental effort to control the crypto ecosystem amid rising geopolitical tensions.

Aksakov stated that the forthcoming legislation aims to restrict non-Russian crypto operations to reinforce the ruble’s dominance, explaining:

“Digital financial assets issued in Russian jurisdiction, and digital rubles will be allowed. The need for a ban is due to the fact that today cryptocurrency – is a quasi-currency that replaces the ruble in the country. But only the Russian ruble fulfills the mission of the monetary unit, so this decision has been made.”

The bill will carve out exceptions for crypto miners and Central Bank-sponsored test projects within an experimental legal framework, as crypto mining significantly boosts Russia’s tax revenues. According to data from Statista, crypto miners produce over $2.59 billion in liquidity for foreign trade settlements in Russia.

However, there is an intense internal debate among Russian policymakers regarding this approach. Artem Kiryanov, Deputy Chairman of the State Duma Committee on Economic Policy, stressed the importance of precise regulations.

“The regulation of cryptocurrency should be prescribed in the digital code, which would clearly spell out the conceptual apparatus and common judicial law enforcement practice,” Kiryanov said.

In contrast, Russia’s Finance Minister, Anton Siluanov, has pushed for a more moderated stance, advocating for regulation to enable the use of cryptocurrencies in both domestic and international transactions. Elvira Nabiullina, Head of the Bank of Russia, also supports the experimental use of cryptocurrencies in international settlements.

Recent reports indicate that Russian entities have used cryptocurrencies, particularly Tether’s USDT, to procure critical components for military technology. In one notable case, Andrey Zverev, a Russian operative based in China, used USDT in 2022 to bypass traditional banking channels and purchase drone components essential for military operations in Ukraine, avoiding the scrutiny typically associated with sanctions-wary financial institutions.