Russia is working rapidly to utilize crypto as payment for international trades. In just 2 months, from lower house bills to becoming ready to test payments, they has worked very fast. Lower house of Russian parliament passed the bills in July and on August 8, the president approved them. By September, Russia will start testing. Why is Russia in so much hurry and how are they going to make it happen so fast, let’s explore.
Why Russia needs Crypto
Western regulators imposed sanctions over Russia in 2022 when they launched a war over Ukraine. These sanctions have forced their trade partners to withdraw their support. It was clear that whoever will have trade partnerships with Russian companies will also get sanctions. SWIFT services handle international transactions, but they only work with the US Dollar and Euro. To perform any kind of trade, the central bank of those countries will need to use SWIFT for transactions which can invite sanctions to those countries as well.
This has started to harm Russian international trade, and they need a payment system nobody can control – in other words, a decentralized payment system. We all know what is the only payment system that no one can control – the cryptocurrency. Hence, Russia, who has put a complete ban on crypto payments and mining since 2022, has turned to use it for international transactions.
The Russia Crypto Bills
On July 31, 2024, the parliament of Russia passed two crypto bills. One bill will allow Russia to use cryptos as a mode of payment for international transactions and the other will allow specific institutions to mine crypto. These two bills once passed in the Russian parliament were sent to be approved by the President. Russian President Putin passed these crypto bills on 8th August 2024.
Infrastructure setup for Crypto Trials
Now that everything has been approved, Russia is in setup mode. The crypto payment structure will require an infrastructure for fully functional crypto setup. They are going to utilize their existing National Payment Card System (NPCS) for these payments. Russia set up this payment system in 2014, and it primarily runs the Mir payment cards and interbank payment systems.
By September 1, Russia will start trials of crypto payments and will use the existing infrastructure of NPCS. Russia chose this setup because it has the necessary infrastructure for interbank settlements and can easily adapt to crypto. The Russian Central Bank is tightening its grip on NPCS inorder to keep the system fully regulated. Once trials are a success, they might allow the Moscow Exchange and St. Petersburg Currency Exchange to create crypto platforms next year.
Looking Ahead
Russia is all set to start testing its crypto payments system. However, it would be very interesting to see with whom they will start these trials. There are very few countries who have regulations in place for international crypto transactions. And there are even very few who would trade with Russia, as the sword of western sanctions always hangs above them. The U.S. is definitely very angry at this step by Russia and the world is waiting for some words from them.
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