Russian President Vladimir Putin has penned a new law, effectively banning the use of digital assets as payment for goods and services in the country.
As per the law, which came into effect on July 16, 2022, cryptocurrencies and NFTs are no longer accepted as legal payment methods in Russia. However, it is still possible to sell, buy, exchange, and pledge these assets.
Russia has always had a tumultuous relationship with digital assets. This latest development comes at the back of several mixed signals from Russian authorities over the last few years.
Here’s a look at some of these comments and decisions that highlight the confusing sentiments around this asset class.
Early hopes, regulations and bans
In early 2015, Putin first spoke about Bitcoin as something that “cannot be dismissed” despite it not being backed by anything or anyone. Back then, a majority of crypto-optimists took this as a sign of Russia’s acceptance of digital assets.
However, two years later, Putin had grown weary of cryptocurrencies, saying they pose “serious risks” as he pushed for regulation. Later in the same year, he issued five new decrees related to cryptocurrency, including rules around ICOs.
In 2019, Putin seemed to be in a rush to adopt cryptocurrency regulation. He even set a deadline for lawmakers, ordering the government to adopt federal regulation for digital assets by July 1, 2019.
However, it was only in mid-2020 that concrete regulations were formed when Putin signed two new bills into law. These new rules stated that cryptocurrencies such as Bitcoin, Ether, and others can be traded, but could not be used as a mode of payment for goods and services.
However, little more than a year later, in late 2021, Putin made some very surprising comments in an interview with CNBC. He said that cryptocurrencies had “the right to exist and can be used as a means of payment.”
Putin also seemed to be warming up to Bitcoin mining. “Of course, we also have certain competitive advantages here (in Russia), especially in the so-called mining,” Putin said in a video conference meeting with government members. He was referring to the cold temperatures and the cost-effective availability of electricity.
However, around the same time, in early 2022, Russia’s central bank advocated for a comprehensive ban on cryptocurrencies. It urged lawmakers to pass legislation making cryptocurrency trading, mining, and use illegal in Russia. However, such harsh legislation was avoided after Putin signed the latest bill into law earlier this week.
The Russia-Ukraine War
The ongoing Russia-Ukraine war could have something to do with the changed sentiments of the country towards digital assets. On both sides, Bitcoin and other cryptocurrencies are widely used to transfer funds. The worldwide support for Ukraine has also come in the form of crypto donations that are being used to buy war essentials.
On the Russian side, western sanctions led to the Kremlin’s first failure to pay a loan instalment since 1998. This is despite having enough and more foreign reserves.
The sanctions could be why Russia hasn’t put a blanket ban on all digital assets but allowed them as a store of wealth. Moving forward, Russia might engage economically with other countries with digital assets to get past the international sanctions.
It could be one of the reasons why the new bill has certain exceptions to the law when it comes to receiving payment in the form of digital assets from outside Russia.
