Over the years, Russia has sent mixed signals about its relationship with cryptocurrencies. Lately, the Kremlin appears to have started to embrace crypto. Is this really the case?
First crypto regulations in Russia
Until the 2020s, cryptocurrency in Russia effectively existed in a gray area. In July 2020, President Vladimir Putin signed a Digital Financial Assets (DFA) Regulation allowing crypto transactions while prohibiting residents from using crypto as a means of payment.
DFAs can be used by banks registered with the Russian central bank, known as the Bank of Russia. Challenging crypto transactions in court is only possible if crypto possession is maintained and the owner reports the transactions.
In February 2022, the Russian central bank published a consultation paper titled “Cryptocurrencies: Trends, Risks and Regulation”. He mentions Russia’s leading role in mining capacity and the fact that Russians are actively trading cryptocurrencies. Additionally, the paper calls the potential for using crypto for settlements “limited,” even in the long term.
According to the Bank, cryptocurrencies threaten the well-being of Russians, so it is essential to ensure full transparency of crypto transactions. The document calls for banning the creation of cryptocurrencies and crypto exchanges, prohibiting financial institutions from investing in crypto or related assets, and banning mining altogether.
Additionally, the central bank urged the government to monitor the activity of Russian citizens on foreign cryptocurrency platforms. The consultation document mentioned the ongoing development of a digital ruble as a possible legal alternative to cryptocurrencies.
The reason for the thawing of cryptocurrencies
It is safe to say that the 2022 consultation document has not shaped modern Russia’s relationship with cryptocurrency. Despite the central bank’s recommendations, the Kremlin chose a path that was not the restrictive approach typical of Russian strategic partners such as China, Iran, Turkey, Belarus or India.
The apparent reason for this “cryptocurrency thaw” is simple: Russia has become more crypto-friendly as Western sanctions have shrunk the foreign trade space.
On December 25, 2024, in an interview with the Russia 24 television channel, the Ministry of Financer Anton Siluanov admitted that Russian companies are increasingly using Bitcoin for international trade and that Putin will not stand in the way of this process. The Russian president actually signed the legislation legalizing the limited use of crypto for international trade in the summer of 2024. The law allowing Russian companies and individuals to mine, buy and sell crypto was signed in August and came into force on November 1. 2024. The use of crypto as a means of payment in the country is, however, still prohibited. Crypto advertising is also not allowed.
However, the need to circumvent sanctions is not the only reason for crypto’s friendlier approach.
Bitcoin mining, dollar weakening
Crypto is famous for its independence from governments, but that is not the only reason why the Russian government has resorted to this asset that its strategic adversaries cannot block.
For years, Putin has been a consistent supporter of dedollarization and cryptocurrencies, which he didn’t like at first, but which turned out to be what he needed. The US dollar is the backbone of global trade (more than half of foreign trade is conducted via the US dollar) and the world’s reserve currency. But now, as the US government seeks to strengthen Bitcoin, the US dollar could face challenges.
Some experts warn that in the United States, Bitcoin can only become stronger at the expense of the strength of the dollar. So the bitcoinization of America is a dedollarization. Additionally, foreign trade carried out via Bitcoin instead of the US dollar (this is what Russia is currently doing) works against the dollar. Since USD is not Russia’s national currency, the Kremlin doesn’t lose more than America when it brings more bitcoins into the game, because bitcoins hurt the dollar more than the ruble. US efforts to create a strategic Bitcoin reserve could only make the US dollar worse off. Ukraine has previously called for blocking Russia’s use of bitcoins in international trade.
Another possible reason why the government has chosen to use the potential of cryptocurrencies is the support of sanctioned tycoons. One of them is aluminum and energy oligarch Oleg Deripaska. Its aluminum plant, Rusal, was transformed into a mining farm in 2019. The company is called Russian Mining Company. It was co-founded by Russian official Dmitri Marinichev.who estimated the mining capacity of the RMC at 20% of global Bitcoin mining production.
RMC has only been mentioned once in the media, and it is not the only crypto mining company with ties to Deripaska. BitRiver is considered the largest crypto mining company, and there is no evidence that BitRiver is the same company as RMC. However, RMC co-founder Marinichev was named deputy director of communications at BitRiver.
BitRiver was sanctioned by the US Treasury in 2022. BitRiver CEO Igor Runets emphasized that BitRiver had no ties to the Kremlin and that the sanctions were purely competitively motivated. Bloomberg points out that Deripaska, close to the Russian government, played a notable role in creating BitRiver and providing mining equipment facilities to Bratsk, a Siberian city with a cold climate well suited to mining. . BitRiver’s power supply was provided by energy company En+, one of Deripaska’s main assets.
Final Thoughts
Has a crypto thaw come to Russia? It seems so. But the thaw is far from summer or spring. Rather, it is a short period of defrosting, a time of hope. As with Khrushchev’s thaw, this is a period when pressure weakens and new opportunities present themselves to elites and certain individuals. Time will tell what’s next.
