Russia's Journey with Cryptocurrency: Navigating Sanctions and Legal Frameworks

folks Putin has been orange pilled this is not a drill the sanctions on Russia have gotten so bad that they're going to

start conducting international trade in crypto this year but wait isn't crypto banned in Russia I hear you say well

yeah kind of it's complicated but stick around and I'll explain everything you need to know you'll learn about the

legal status of crypto in Russia and how the government could be using it to cut trade deals stay

tuned Russia like so many other countries has a messy history of flip-flopping when it comes to crypto

different parts of the state publicly fight over crypto policy decisions at times they've held such contradictory

positions that President Putin has had to step in and tell them to make their minds up unsurprisingly this has created

much confusion about the legal status of crypto in Russia so before we get stuck into Russia's latest experiment with

crypto it'll help to untangle the messy policy history that led the government to where it is today so we'll start back

in 2014 or as I like to call it the Triassic era in January of that year the bank of Russia warned citizens and

businesses that buying and selling crypto would be considered as quote potential involvement in the

implementation of suspicious transactions in accordance with moneya laundering and count counterterrorism

laws later that year though the bank toned down its rhetoric and clarified that it wouldn't seek to punish citizens

for using crypto then Deputy chairman Gori lovsky explained quote at this stage we need to watch how the situation

develops with these kinds of currencies these instruments should not be rejected however by the time the bank made this

clarification the general prosecutor's office was trying to ban crypto outright it issued a statement that read quote

cryptocurrencies including Bitcoin are monetary surrogates as such they use by private citizens or legal entities is

not allowed the official Russian currency is the ruble the use of any other monetary instruments or surrogates

is forbidden the Ministry of Finance took the same Hardline view it drafted a bill to Outlaw the issuance of Bitcoin

and quote any operations involving cryptocurrency this bill though was roundly criticized by Russia's Ministry

of Economic Development the national payments Council and various industry leaders who argued that it was vague and

excessive this disagreement within government turned this draft bill into a 4-year Saga of delays revisions and

u-turns meanwhile confusion about the legal status of crypto in Russia continued in the early days the Ministry

of Finance was preoccupied with how to punish citizens who dabbled in crypto like in 2015 when they proposed to make

buying and selling crypto punishable with up to 360 hours of Correctional labor and that was on the lenient side

around the same time Deputy Finance Minister alexe Mev told coindesk that off- ramping crypto to Russian rubles

would be punishable with up to four years in prison interestingly under that particular version of the draft Bill

Mining and exchanging crypto for crypto or even foreign Fiat currencies would be allowed also in 2015 Russia's media

Watchdog began blocking access to website sharing information and resources related to bitcoin adding to

the impression that crypto was banned in Russia however around the same time the bank of Russia reportedly met with

representatives from financial markets to discuss regulating Bitcoin this created the impression that the central

bank now opposed an outright ban a few months later Putin himself stepped into the ring making his first known comments

on crypto he sided with the bank of Russia in opposing an outright ban on crypto so then no ban well not so fast

in early 2016 one of Putin's own advisers German clco told a Russian news outlet that quote accepting Bitcoin as a

payment for anything is unacceptable because it is a crime then in March 2016 the ministry of fin Finance beefed up

its draft bill with a harsher penalty of up to 7 years in prison for issuers of cryptocurrencies in Russia the ministry

of Justice sharply criticized this version of the bill and it ended up being withdrawn the finance ministry

then u-turned on its plans to criminalize crypto and decided to regulate instead of banning it Deputy

Finance Minister Mev got a little carried away with this U-Turn when he publicly suggested that Russia would

legally recognize Bitcoin as a kind of financial instrument this proved a little too much for the

bank of Russia which clarified that it had no such plan the confusion continued and more delays ensued for the draft

crypto Bill and by the way if you're enjoying this video drop a like to give it a boost and while you're at it go

ahead and make sure you're subscribed and have your bell notifications turned on so you can catch our next video

before anyone else block Vander chain house and that was a brutal game of rugby you and the rest of the team must

be hurting after that defeat yeah yeah look it was so so tough out there today you know everyone put their bodies on

the line everyone stood up to be counted but yeah we're GED Not to Come Away with a win for sure for sure so you came up

against a very physical side who were up for the battle all over the park did the fact that they had the coin Bureau deals

page behind them count against you yeah yeah look for sure any side that has that sort of Firepower backing up is

always going to be hard to break down any team in the world is going to want the coin be deals pag in its Locker for

sure for sure those 70% trading fee discounts and $100,000 sign up bonuses they really seem to make the difference

in the second half yeah yeah look I I'm not going to lie Brew we could not compete on that level and when the other

side were able to deploy those massive discounts on Hardware wets and it was pretty much pretty much game over at

that point for sure yeah yeah no block obviously everyone back home is going to be hugely disappointed with today's

results is there any message you'd like to send to your fans yeah yeah look what can I say but they should check out the

coin bu deals page you know you you have to recognize quality when you see it so yeah heads off to them they made the

difference out there today for sure for sure wise words to finish thanks block yeah yeah all good blue yeah just yeah

now 2017 was a big year for crypto and Russia was no exception anti- Crypt ban elements of the government now led by

the Ministry of Finance were emboldened when po briefly met with ethereum vind vital buaran to discuss opportunities

for using blockchain in the public sector one of Putin's advisers Dimitri marinv tried to raise $100 million in an

Ico for his new Bitcoin mining company and Russia's Finance Minister agreed there was quote no point in trying to

ban crypto around the same time another Putin adviser announced the creation of the Russian Association of blockchain

and cryptocurrency AKA rabic as the name suggests rabic promotes the use of blockchain and crypto in government and

by businesses in Russia meanwhile institutions from the central bank to the ministries of Health Communications

and economic development the Russian Development Bank the federal anti-monopoly service and the government

of Moscow tried the use of blockchains for their own purposes including at least one ethereum fork in 2018 the two

largest banks in Russia one of which is owned by the Central Bank piloted crypto investment products for their private

clients at the same time the bank of Russia itself experimented with conducting icos apparently with some

success a senior employee of the bank claimed quote technically everything went well but there were a lot of issues

from a legal point of view no kidding this experiment marked the top for the central bank's flirtation with crypto

however over the next year it roundt tripped its entire position and I'm not talking p&l here in 2019 the bank

returned to an anti- crypto stance confirming to a local news agency that it would support a potential ban on

crypto payments and unfortunately they really meant it this time in August 2020 Putin finally signed into law the first

of a series of crypto bills reflecting the views of the Central Bank and finance ministry that came close to an

outright ban under the pretext of protecting consumers the law effectively banned any business facilitating crypto

transactions to be precise it forbids any operations involving virtual currencies using Russian servers or

websites registered by Russian providers the law also distinguishes between decentralized cryptocurrencies like

Bitcoin and digital assets issued by entities within Russia who must be registered with the central bank and

meet C criteria but this prohibitive approach remained divisive within government the ministry of Justice

complained that the law would turn Russian courts into Bag holders because while it allows courts to seize crypto

assets it also prevents them from selling them at auction as is usually done with seized property the ministry

of Economic Development also criticized the bill on the grounds that it would merely push the domestic Market

underground or overseas it pointed out that Russian consumers could still use foreign crypto exchanges but the law

doesn't allow the government to protect their rights in any way but despite the criticism the bank of Russia and

Ministry of Finance continue to press for even more restrictive measures to be added to the new legislation for example

a package of amendments that took effect in January 2021 required crypto users to report to the government the address

transaction history and balance of any wallet that receives more than the equ equivalent of

$1,300 in crypto in one year it also bans public sector workers from holding crypto as if this wasn't restrictive

enough the bank of Russia also sought to limit the amount that retail investors can spend on digital assets to the

equivalent of around $7,000 per year however this limit only applies to digital securities issued within Russia

with the blessing of the Central Bank and not cryptocurrencies like Bitcoin now in early 2022 the plot thickened

when a working group comprising several government agencies including the Ministry of Finance published a road map

for regulating crypto in a direct challenge to the bank of Russia's demand for an outright ban the bank responded

by reiterating its call for a total ban on crypto which it called a quote de facto Ponzi scheme interestingly one

area the central bank and finance ministry seem to have agreed upon was the need to ban digital asset payments

the earlier law from 2020 had already banned payments in cryptos like BTC and eth but this did not extend to the

category of digital assets that are issued by Russian entities with Central Bank permission Putin signed into law

this additional ban in July 2022 this will have been a major disappointment for spare Russia's largest retail bank

which had previously filed an application with the central bank to launch its own Ruble stable coin but on

the other hand it can't have been too much of a shock because a Ruble stable coin was always going to be a long shot

and that's because a rubble stable coin would be a direct competitor with yep you know what comes next Russia's own

cbdc behind the bank of Russia's DieHard opposition to crypto is its plan for a digital Ruble which is intended to

replace crypto entirely in Russia in early 2022 the Central Bank began piloting its digital Ruble with 12 Banks

supporting transactions in their mobile apps and providing gateways to exchange rubles for the new cbdc real world tests

followed in 2023 and the central bank has said that Russians should be able to use the digital Ruble quote at their own

request starting in 2025 the chair of the Parliamentary committe on the financial Market Anatoli

aksakov described the advantages of Russia's cbdc thus quote no matter how much a school child wants to use his

mother's digital Ruble for unhealthy sweets he will not be able to use the money for other purposes the intended

purpose of the money allocated by parents to the child will be spelled out in a special smart contract haha

probably nothing now unsurprisingly the war in Ukraine has transformed Russia's economy

sanctions imposed by the United States and its allies have shut Russia out of the US dollar-based Global Financial

system while energy revenues have been declining and spending on the war has reportedly been draining Russia's budget

and recently Russia's trading partners have tightened up their compliance with the us-led sanctions regime as they find

themselves under the threat of secondary sanctions this has resulted in significant delays in payments to Moscow

payments to Russian oil firms from China turkey and UAE for example have reportedly been delayed by months and in

some cases rejected the bank of Russia has identified these delays as a major challenge for the economy leading to an

8% decline in Russian Imports in the second quarter of this year as you might expect Russia urgently needs alternative

methods of settling International payments so let's look at what options are available Anatoli aov who

co-authored Russia's cbdc legislation told walked up the digital Rubble as a way to circumvent sanctions he claimed

quote we will be able to use this technology to carry out settlements with foreign countries and foreign companies

thus it will be very difficult for our enemies including the United States to influence our financial activities but

according to blockchain researcher David Gerard quote the problem is that nobody wants rubles digital or otherwise

speaking to the Moscow times Gerard pointed out that the digital Ruble quote doesn't do anything that the state can't

already do the bank of Russia is well aware of this and as such its language mostly focuses on the digital rubble's

domestic functions meanwhile much has been made of efforts to develop an alternative payment system within the

bricks group but if you've seen our latest video about this you'll know it's only recently reached the minimum viable

product stage the governor of the bank of Russia described discussions with Russia's bricks Partners as quote

difficult and acknowledge that establishing such a system will take time and frankly Russia can't sit around

waiting for this option to materialize at the moment Russian companies have resorted to going through small banks in

Border regions with weaker compliance departments for processing transactions however the US Treasury is hot on their

tail and playing sanctions whack-a-mole as it identifies these Banks so the digital rub the bricks bridge and

obscure banks in Border regions none of them are a silver bullet sanctions have got Russia in a tight spot and now the

central bank has come crawling back to crypto because as much as they want to ban it the bank of Russia now agrees

with the Ministry of Finance that Russia can't avoid using crypto for international trade and this explains

the experimental legal regime recently introduced by the state d um Russia's Parliament this regime grants the

Central Bank authority to permit selected companies to conduct cross border settlements and exchange trading

in digital currency the law goes into effect on the 1st of September and the first such International crypto payments

are expected before the end of the year the fact that the central bank which has so far been determined to ban crypto in

order to supplant it with a cbdc is now embracing it as a tool to get around sanctions shows how badly Russia needs

alternative methods of international payment but what does this mean for crypto inside Russia well firstly the

new legislation does not change the existing bans on crypto payments and trading within Russia rather it

complement them by adding additional banss on Advertising crypto and offering crypto to an unlimited number of people

the new law also legalizes crypto mining in Russia from the the 1st of November now Russia already has an active mining

industry but this is the first systematic attempt at regulating it to mine at scale miners will now have to

register with the government and Report any mined crypto as well as meet certain requirements and responsibilities to be

determined by the government in agreement with the Central Bank next the new law mandates the creation of a quote

platform for operations with cryptocurrency based based on the national payment system the national

payment system is the central bank owned payment rail for clearing bank card transactions in Russia presumably this

platform will be for businesses participating in the experimental use of crypto for international trade no

details are available at the moment but it sounds like the central bank will seek to be an intermediary in crypto

transactions in the same way that visa and MasterCard are intermediaries in bank card transactions if domestic

crypto payments are ever legalized we should hope that they aren't forced onto this Central Bank rail because that

would rather defeat the point however this would not surprise us because as we found out earlier the government is

basically split between two camps neither of whom are reliably crypto-friendly on the one hand you have

the faction represented by the Ministry of Finance which wants prison sentences for such transgressions as issuing your

own meme coin or failing to report a wallet with 0.5 e it on the other you have the central bank which just wants

to ban crypto entirely in the new experimental regime it seems to be the bank of Russia that's in the driver's

seat and with the digital Ruble looking primed for a nationwide rollout frankly we're not that optimistic about the

legal outlook for crypto in Russia then again though if the Russian public benefits in any significant way from

crypto being used to facilitate international trade a domestic ban on crypto to in Russia would look more

audacious than ever and if the government is going to write smart contracts dictating what people can and

can't do with their money then demand for crypto from your average Russian is very likely to

increase right that's all for today folks if you're watching from Russia why not let us know how you feel about the

crypto laws over there in the comments smash the like if you're looking forward to nation states cutting trade deals in

BTC and make sure you're subscribed and have your bell notification switched on so you'll be the first to catch our next

upload as always thank you for watching and I'll see you next timey [Music]