The law bans digital securities and utility tokens from being used to pay for goods or services in Russia. Crypto exchanges are required to bar any transactions where digital transfers are considered as payment.
This new law will come into effect in 10 days’ time.
The initial draft of the bill, introduced on 7 June, specified the “prohibition against the introduction of other monetary units or monetary surrogates on the territory of the Russian Federation," according to Cointelegraph.
The Duma, which is the Russian assembly, approved the law on 8 July, after which it was signed by the President.
Russia Develops Digital Ruble
Digital assets and cryptocurrencies are likely being used in Russia to circumvent sanctions placed on them by western nations, in retaliation against the Russian invasion of Ukraine, The New York Times reported.
The report said that governments usually rely on banks to help monitor and regulate transactions, but digital currencies can be used to bypass these government “control points.”
Iran and North Korea have reportedly mitigated the effects of such sanctions using digital tokens as well.
Russia's government is currently developing its own central bank digital currency (CBDC), the digital ruble, which will be a digital form of its sovereign currency.
Russia intends for this digital ruble to help with international trade, without the use of US dollars, effectively replacing the financial messaging system SWIFT.
A pilot project is scheduled for April 2023 and 12 banks are part of the project. A full fledged rollout is expected to take about three years, according to Olga Skorobogatova, first deputy chairman of the Central Bank of Russia.
Tussle Over Crypto
The Central Bank of Russia and Russia’s Finance Ministry were reportedly at loggerheads regarding legislations about digital assets and cryptocurrency in the country.
While the Central Bank wanted to ban cryptocurrencies, the Ministry of Finance felt that the space should just be regulated to allow it to develop more. The Finance Ministry even introduced a bill in February, detailing these proposed regulations.
This new law banning crypto payments is closer to the bill introduced in February by the Finance Ministry, rather than the Central Bank’s call to ban all digital assets, as investing in digital assets are still allowed (they just can’t be used as a mode of payment), Decrypt reports.
The current law on digital assets is an extension of a law introduced in 2020 that placed restrictions on cryptocurrencies being used for payments.
Apart from the bill to regulate cryptocurrency that was introduced in February, there is another bill pending to be discussed in the Russian Parliament, regarding mining of cryptocurrency, and a possible procedure that could be put in place to register those who do it, as per Cointelegraph.
(With inputs from Cointelegraph, Decrypt, and The New York Times)