Russia to start cryptocurrency trials for cross-border payments

Russia is moving one step closer to using cryptocurrencies for international payments as sanctions continue to impact its economy.

Per a report from Bloomberg, sources familiar with the matter claim that Russia will start trials for using digital assets in cross-border payments starting September 1.

The move would allow the country to bypass sanctions implemented by Western regulators in 2022 after Russia initiated a war over its neighbouring nation Ukraine.

The Russian government will look to use the National Payment Card System (NPCS) during the trials to allow swapping between cryptocurrencies and the ruble.

The NPCS was introduced in 2014 to handle ruble transactions and interbank settlements through the Mir payment cards. 

The platform is now being repurposed to support Russia’s shift towards using digital assets for international trade.

The NPCS, overseen by the Russian central bank, will offer a regulated and secure environment for these trials, minimising risks.

Efforts to curb sanctions

Western sanctions have isolated Russia’s businesses from the global financial system. As such, businesses involved with exports and imports have been facing difficulties in settling payments.

This prompted President Vladimir Putin to sign a bill into law on August 8. that proposed using cryptocurrencies to conduct cross-border trade after being approved by the State Duma, the lower house of the Russian Parliament, just days before.

With this legislation in place, the Central Bank of Russia was allowed to modify regulations around cryptocurrency trading platforms and alter the provisions for incorporating digital currencies into the nation’s financial system.

The central bank was also granted the authority to oversee pilot projects like the one currently in play.

On the same day, the president signed another law allowing approved entities to mine cryptocurrencies in the nation after registering via a state database. 

The law, set to come into effect in November 2024, will empower the Ministry of Finance and the Bank of Russia to regulate the crypto-mining sector jointly.

Domestic crypto exchanges

Russia is also looking to launch two domestic cryptocurrency exchanges, among other initiatives.

Reports from local media on Aug. 23 suggested that one platform would be leveraging the existing infrastructure of the St. Petersburg International Mercantile Exchange while the other would be based on the Moscow stock exchange.

However, these exchanges would be focused on Stablecoins rather than facilitating cryptocurrency trading. 

In a recent interview, Alexey Guznov, the Bank of Russia’s state secretary, said the central bank was open to using stablecoins for cross-border trades, provided they meet certain criteria.

Specifically, the stablecoins must be backed by a reliable party and resemble digital financial assets already recognised under Russian law.

According to the sources in the Bloomberg report, if the upcoming trials are successful, the Russian government could be looking to allow the St. Petersburg Currency Exchange and the Moscow Exchange to introduce the crypto platforms in 2025. 

Meanwhile, in an August 14 report, Russian Finance Minister Anton Siluanov said that crypto exchanges are currently in the “gray zone” and authorities have “not yet found a solution” on how to regulate these entities.

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