Russia will begin trials for using digital assets, specifically cryptocurrencies, to facilitate cross-border transactions, starting from September 1, 2024. The move is seen as Moscow's response to Western sanctions imposed due to the ongoing conflict in Ukraine.
Leveraging the National Payment Card System
The trials will involve the National Payment Card System (NPCS), established in 2014, which already handles domestic interbank payments and operates the Mir payment cards. The NPCS was chosen for these trials due to its robust infrastructure and regulatory framework, making it an ideal platform for experimenting with digital currencies. The central bank, which oversees the NPCS, is fully regulating the experiment. With the NPCS, Russia hopes to ease the payment difficulties its exporters face, made worse by international sanctions.
The Legislative Framework
This development follows a series of legislative changes in Russia aimed at integrating cryptocurrencies into the national economy. In July 2024, the Russian parliament passed two key bills that lay the groundwork for the use of digital assets in international trade. One of these bills legalizes the use of cryptocurrencies as a payment method for cross-border transactions, while the other authorizes specific institutions to mine crypto. These bills were signed into law by Russian President Vladimir Putin on August 8.
Next Steps
If the trials prove successful, Russia may see the establishment of crypto trading platforms by the Moscow Exchange and the St. Petersburg Currency Exchange as early as next year. These platforms would allow for the exchange of rubles and cryptocurrencies, providing a regulated environment for such transactions. However, the path to full integration is not without its hurdles. Traditional cryptocurrency exchanges, which operate outside of government control, present a different set of challenges. According to finance minister Anton Siluanov, Russia is willing to explore digital assets but is cautious about unregulated platforms.
The trials of digital assets for cross-border transactions in Russia have the potential to ease payment difficulties under sanctions and may lead to the establishment of regulated crypto trading platforms. However, significant challenges remain on the path to full integration.
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