Bank of Russia Considers Legal Experiment for Cryptocurrency Use

Russia’s central bank is open to evaluating cryptocurrency use within the country, but solely as part of a legal experiment, Governor Elvira Nabiullina disclosed on December 16. She stated:

“It’s possible to consider transactions through an authorized organization in the country as part of an experimental legal regime, but that would require a relevant law.”

This statement marks a new direction for the Bank of Russia, which has consistently maintained a strict stance against cryptocurrencies functioning as payment instruments. Nabiullina urged caution, emphasizing the need for investor protection given the market’s inherent volatility.

Central Bank’s Concerns

While Russia does not outright ban its citizens from investing in cryptocurrencies, the central bank remains apprehensive about the mass adoption of digital assets leading to their use as payment methods. Deputy Governor Alexey Zabotkin explained:

“If you allow free circulation of cryptocurrency as an investment tool within the country, then inevitably, with the expansion of its ownership, it will become more widely used as a means of payment. It will be impossible to prevent this.”

If approved, Russia’s experimental regime will aim to promote cryptocurrency usage but will be focused primarily on “supporting foreign trade,” Zabotkin emphasized.

Context of the Current Situation

The recent comments shed light on the motivations behind the Bank of Russia’s previously negative views toward cryptocurrency adoption. The country’s major crypto legislation, known as “On Digital Financial Assets,” was enacted in 2020 and officially forbade the use of cryptocurrencies like Bitcoin (BTC) for payment purposes. However, the law did not impose a ban on Russian citizens from investing in crypto assets, leading to a landscape where local exchanges remain largely unregulated.

Balancing Decentralization and Control

While the government exhibits resistance towards decentralized finance tools such as Bitcoin for personal use, it is simultaneously seeking to harness the potential advantages of decentralization on the global stage. In late November, President Vladimir Putin highlighted the issues surrounding monopolies in global financial payment systems, advocating for the development of an independent, blockchain-based settlement network.