Discover a Russian official’s plan to use bitcoin exchanges for cross-border transactions to circumvent international sanctions, noting the state regime’s official but inconclusive claims.
Anatoly Aksakov, the chairman of the State Duma Committee on Financial Markets in Russia, revealed yesterday that cross-border transactions will be conducted through cryptocurrency exchanges to get over limits imposed by international sanctions. Although legally not a member of the government, Aksakov is completely integrated into the state regime, making his statements official but not definitive.
The connection between Russia and cryptocurrencies has evolved over time.
They initially gave off the impression that they were willing to put up with Russian users utilizing them, in part because the nation offers ideal circumstances for Bitcoin mining, for instance.
Later on, though, the nation’s central bank specifically attempted to impose a ban on their usage, most likely to protect the national currency and perhaps to try to pave the way for the virtual ruble.
The partial failure of the digital yuan in ally China, however, may have persuaded the Russian authorities to reevaluate the idea of outlawing cryptocurrencies in favor of a domestic currency that is not very well-liked.
In this regard, Hong Kong’s announcement a few days ago to lift the restriction on cryptocurrency trading for regular investors and speculators marked a turning point in China.
Although Hong Kong has its own laws that are in some ways distinct from those of the motherland, it is still technically a part of Chinese territory.
In fact, it appears that the one in Hong Kong can be seen as a test to see if the necessary circumstances exist for the reopening of cryptocurrency trading throughout the rest of China as well.
Given that China currently dominates the nation under Vladimir Putin’s rule on a political level, there has also been a turning point in Russia’s stance on cryptocurrencies at this point.
Russia’s turning point
Indeed, as Aksakov himself stated, Russia has given up on the concept of establishing a state-owned cryptocurrency exchange in favor of a less controlled environment.
The main issue is specifically how the limitations put in place by international sanctions in reaction to the invasion of Ukraine are being avoided.
It might be simpler for Russia’s adversaries to interfere to try to prohibit, boycott, or restrict its activity if it uses a single crypto exchange in this manner.
Instead, using several exchanges makes it harder for people who wish to stop Russia from using cryptocurrency to get around sanctions to accomplish their goal.
In light of the fact that cryptocurrency exchanges are still de facto prohibited from operating and being used for foreign bitcoin transactions, Aksakov stated that a new bill would be filed.
The head of the Duma Committee on Financial Markets himself has issued a warning to cryptocurrency exchanges considering entering the Russian market, cautioning them against doing so for fear of punishment from rival nations.
Russia: using cryptocurrency to evade sanctions
International sanctions effectively ban or severely restrict cross-border transactions involving fiat currencies into and out of Russia.
They cannot interfere with cryptocurrency transactions, but in order to facilitate fiat currency exchange, which is necessary to facilitate cryptocurrency exchange, they can.
This means that those who want to send cryptocurrencies to Russia from abroad should be able to do so by purchasing them on an exchange using fiat currency and withdrawing them to a crypto wallet they own. Likewise, those who receive cryptocurrencies in Russia should be able to sell them on an exchange for rubles.
Even today, the first step of this process is not at all challenging, in part because, once cryptocurrencies have been withdrawn from a private wallet, it is impossible to stop them from being sent to a different wallet owned by Russian individuals or businesses and incredibly challenging to track down when this has happened.
Because cross-border cryptocurrency transactions are still frowned upon in Russia, the exchange of cryptocurrencies into Russian rubles remains mostly difficult.
For these kinds of transactions to genuinely avoid sanctions, it will be sufficient to design them with legal laws that make them legitimate.
It is obvious that Russian exchanges will find it far simpler to operate in Russia than, say, those established in nations where sending money to Russia is currently prohibited.
New Russian legislation
The new bill on cross-border cryptocurrency transactions does not appear to be particularly simple to adapt to Russian legislation, even though everything seems completely conceivable.
A comprehensive and final version of the bill will likely take some time to develop, but it’s possible that the Russian parliament (the Duma) will try to move things along a little more quickly in order to give the nation access to a similar legal framework as soon as possible.
Evgenia Burova, the communications director for the cryptocurrency exchange Garantex, predicts that a few months after the new law is passed, the first of these cross-border transactions may occur.
Because such transactions will need to be transparent to authorities, it is likely that the central bank will regulate cryptocurrency exchanges.
The resistance of cryptocurrency against censorship
The purpose of this endeavor is not to conceal international bitcoin transfers to and from Russia, as there are many ways to identify such transfers nowadays, especially if they are visible on public blockchains.
The true objective is to become censorship-resistant because it is hard to stop cryptocurrency transfers once they have been removed out of exchanges and placed on a proprietary wallet.
Though not all cryptocurrencies are affected by this, the major ones are.
Therefore, it is not surprising that Aksakov issued a warning to exchanges that will permit the sending of money to Russia, as it is likely that those international transactions will be found out.
However, not all nations now forbid sending money to Russia, therefore there should be no issue for transactions in friendly nations.
Given that China is currently Russia’s biggest friend, it is also now evident why this initiative follows shortly after the Chinese one.