Russia considers greenlighting crypto for international payments to bypass sanctions

On July 23, the Russian parliament will review legislation on whether to allow crypto payments for international transactions in light of ongoing sanctions imposed by the West. The move would be dramatic because Russia currently bans crypto for local payments but has not completely banned crypto in the country.

“This is a necessity for companies, especially in cases where they need to enter the international market, where there are sanctions mechanisms, and this cannot always be solved by standard methods,” said Yuri Chehanchyn, head of Russia’s anti-money laundering agency.

Russia’s decision would not be unprecedented, as other countries under international sanctions, such as Venezuela, also use cryptocurrencies for international payments. Russia is increasingly looking for alternative payment methods to make international payments without violating US-led sanctions when trading with China, India, the United Arab Emirates, and Turkey.

The U.S. is closely monitoring Russia’s use of cryptocurrencies to evade sanctions. U.S. Treasury Secretary Janet Yellen recently testified before the House Financial Services Committee: “We are very careful about this. [Russian] “The use of cryptocurrencies and stablecoins. We don’t think what Russia did was a big deal, but as our sanctions get more and more painful, it’s becoming a concern.”

“The Central Bank of Russia has encouraged the use of crypto to evade Western sanctions,” California Democratic Congressman Brad Sherman said at the hearing. “A stablecoin doesn’t offer any particular advantage, such as being stable, not being able to make money by holding it, and generally not paying interest — certainly not the interest you get in money market funds. Its only advantage is to evade our sanctions and other laws, including tax laws, and I hope that you don’t facilitate that by facilitating stablecoins as you impose our sanctions on Russia,” he told Yellen.

Even inside Russia, Vladimir Putin has continued to criticize bitcoin mining’s high energy footprint. According to the Russian Energy Ministry, mining consumes about 1.5% of the country’s total energy use each year, averaging 16 billion kilowatt-hours annually.

“The figure keeps growing,” Putin said this month. He stressed that Russia’s relatively cheap energy costs make it easier for bitcoin miners to operate. Russia is the world’s top country for crypto mining after the United States. While mining takes place in several regions of Russia, a major mining area is Dagestan, a North Caucasus republic that faces regular power outages due to poor infrastructure.

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Putin, however, is very wary of the impact of mining on the power grid: “What we need to pay attention to here and what is worrying is that the uncontrolled growth in electricity consumption for cryptocurrency mining can lead to a power shortage in certain regions,” Putin said earlier this month.

Putin warned that the growth of mining farms would “block new jobs, residential areas and social facilities through supply disruptions and suspend promising investment and infrastructure projects.”