Why Russia Imposed Ban On Cryptocurrencies?

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From September 1, 2024, Russia will impose strict restrictions on cryptocurrency circulation. However, this restriction excludes assets issued within its jurisdiction. Anatoly Aksakov’s move aims to strengthen the Russian ruble’s dominance amidst geopolitical tensions.

Aksakov has highlighted the need to maintain the status of the ruble as the primary monetary unit. Non-Russian crypto operations will be restricted to ensure this. However, exceptions will be made for crypto miners and Central Bank projects for capitalizing on the economic benefits of crypto mining. This would significantly contribute to tax revenues. 

Exemptions for Miners and Projects under the Central Bank

Despite the proposed ban on cryptocurrency, the legislature has exemptions for certain groups. Crypto miners can operate post-ban, contributing to the Russian economy. Also, certain projects shall continue under a special legal framework under the Central Bank. This experimental set-up is proposed to test how these projects will be functioning within the regulatory environment.

Russian crypto miners contribute approximately $2.59 billion in liquidity for foreign trade settlements. This highlights the significant impact of crypto mining in Russia, which turns out to be an economic boon for the country.

Contrasting Views Within Government

Irrespective of all these measures, there’s an ongoing debate within Russian policymakers. Finance Minister Anton Siluanov has advocated for regulated use rather than an outright ban. He suggests that it should permit the use of cryptocurrencies in both domestic and international transactions. 

Artem Kiryanov, Deputy Chairman of the State Duma Committee on Economic Policy, has also emphasized the need for precise regulations, stating: 

“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,” 

Similarly, Elvira Nabiullina, Head of the Bank of Russia, supports the controlled utilization of cryptocurrencies for international settlements. Unlike China, which faced market downturns following its comprehensive crypto ban, Russia’s relatively smaller crypto mining industry suggests that the global market impact of this legislation might be less severe. Also, recent reports highlight instances of Russian entities utilizing cryptocurrencies to procure military technology. It showcases how complex the intersections of finance and geopolitics are.