Russia passes historic crypto rules to regulate trading and target foreign trade

Russia has enacted a sweeping set of cryptocurrency regulations, marking a historic shift in its approach to digital assets. The new law, passed by the State Duma on Tuesday, legalizes cryptocurrency trading and mining while explicitly permitting their use in foreign trade settlements.

The legislation is widely seen as Moscow's latest attempt to reduce its reliance on the US dollar and bypass financial sanctions imposed after its invasion of Ukraine. It creates a formal legal framework for an industry that has largely operated in a grey area.

What the new law allows

The bill legalizes the trading of cryptocurrencies on authorized exchanges. It also provides a legal status for crypto mining, which has become a significant industry in Russia due to cheap energy costs.

Most critically, the law allows Russian businesses to use digital currencies for payments with foreign partners. This provision is designed to facilitate trade with countries like China, India, and Iran, where traditional banking channels have become unreliable.

Companies will need to register with a new regulatory body to participate in cross-border crypto payments. The central bank, which had previously advocated for a blanket ban, will now share oversight duties with the finance ministry.

Regulatory framework and oversight

The law imposes strict know-your-customer (KYC) and anti-money laundering (AML) requirements on all crypto service providers. Exchanges must be licensed and will be required to report suspicious transactions to the financial intelligence unit.

Mining operations will face new tax obligations and must register their equipment. The government has also introduced a tiered energy tariff system for miners to prevent strain on regional power grids.

Officials have stated that the law does not legalize cryptocurrency as legal tender within Russia. The ruble remains the sole official currency for domestic transactions.

Sanctions evasion concerns

Western governments have expressed concern that Russia's move could undermine sanctions regimes. The US Treasury Department has previously warned that Moscow might use cryptocurrencies to fund its military operations.

Russian authorities have denied these allegations, insisting the law is aimed at facilitating legitimate trade. The finance ministry has said it will work with international bodies to prevent illicit financial flows.

Analysts remain divided on how effective the new rules will be. While the law provides clarity, enforcement will depend on Russia's ability to track blockchain transactions and cooperate with foreign regulators.

The legislation is expected to be signed by President Vladimir Putin in the coming days. Implementation will be phased, with the first licenses for crypto exchanges likely to be issued before the end of the year.