In late July 2024, Vladimir Putin and the Russian lower federal assembly passed new cryptocurrency mining and experimental laws for digital assets.
Though Russia has been fairly anti-crypto for some time, the new laws paint a very different picture of Russia and other nations’ thoughts on both crypto assets and the reliance on the USD.
Lower Federal Assembly Passes Two Pro-Crypto Bills
The Russian lower federal assembly, or State Duma, passed two bills on July 30, 2024, with each having different dates that they will come into effect.
The first law fully legalizes crypto mining in Russia, and it comes into effect on November 1, 2024. Companies and individuals will have to register with the Ministry of Digital Development in order to participate in mining, unless their energy consumption falls under the limits set by the government.
Oversight is spread amongst various Russian institutions, with the Bank of Russia having veto over everyone. The bank can also ban or restrict transactions with digital currency to maintain Russia’s monetary stability as it sees fit. The new law also bans advertising cryptocurrencies and offering them to an unlimited number of people.
The second law is more experimental and comes into effect on September 1, 2024. It allows the Bank of Russia powers to allow authorized companies to conduct cross-border settlements and exchange trading in digital assets like Bitcoin.
Companies, exchanges and other crypto-related entities will need to apply to the Russian central bank to become part of the experiment.
National Competition?
The somewhat stark shift in Russia’s policy towards Bitcoin and cryptocurrencies seems to have two main reasons. The first is that the US is starting to take a large share of global Bitcoin mining hashrate, and should the US start to consider using Bitcoin as part of its reserves and/or as Bitcoin goes up in value, it will give the US an economic leg up over other nations. This is something that Russia can’t really risk, so it’s worth seeing whether they can take a piece of the mining pie as a nation.
The other reason is closely related to the first, and that’s Russia’s reliance on the USD for foreign trade. But Russia isn’t the only nation who is starting to want to move away from the USD, with countries like China, Brazil, and India, among others, also looking to create avenues for foreign trade with less reliance on the USD.
The experimental law that was passed is one such way they’re going to try and make settlements without reliance on the USD, as it will allow Russian companies to trade and settle with assets other than USD with other countries that are willing to do so. If something like this becomes more common, it will reduce the USD’s role as a global reserve currency, which is likely a good thing long-term.
Closing Thoughts
The shift in Russian policy towards digital assets like Bitcoin is certainly welcome in the sector, as regulation is becoming increasingly clear around the world when it comes to cryptocurrencies.
It seems likely that a lot of countries would like to reduce their reliance on the USD, especially those that aren’t within the G7. These new experimental Russian laws will be an interesting case study in what might happen with less USD reliance.
