TL;DR
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Russia's Duma passed first reading of bill 1194918-8, which would legalize crypto for foreign trade settlement
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It's a response to being cut off from SWIFT in 2022 and the failure of yuan/rupee and stablecoin workarounds like A7A5
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The payment rails will be built entirely within Russia, routed through a Central Bank-controlled depository
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Target date is July 1st, but two more Duma readings, the upper house, and Putin's signature still stand in the way
A new bill that’s being pushed through the Duma in Russia would allow Russian companies to settle foreign trade in crypto. The bill, named 1194918-8, just had its first of three readings in the Duma and passed. During the first reading the Duma’s job is to agree on the concept of the law. They did.
Since its invasion of Ukraine in 2022, Russia has been cut off from SWIFT and the Western correspondent banking. They’ve used local currencies, such as Yuan which Chinese banks then refused to handle, calling them “dirty Yuan”. They’ve used Rupee but that just gave them a lot of foreign currency they couldn’t spend anywhere. Additionally, they’ve been using crypto solutions, for example via a Kyrgyzstan-issued, ruble pegged stable coin called A7A5. This avenue of settlement was recently sanctioned by the EU.
From SWIFT to Stablecoins
So now they’re building their own, crypto based, payment rails. It will create a licensed crypto market in Russia, legalizing holding, selling and buying using crypto currencies. The bill, if written into law, will replace the current patchwork of temporary regulation to make crypto payments work. This bill is a permanent and comprehensive solution to make it legal. However, it can only be used for foreign trade.
The payment rails will be built entirely within Russia. All transactions will be routed through a digital depository system, controlled by the Russian Central Bank. This way, they avoid leaning on international partners that could be sanctioned by third parties.
Now, one reading in the Duma doesn’t mean this is a done deal. The passage of a bill through this branch of government has three readings. The first one to agree on the concept. The second one to make amendments and a third to finalize the language. After that it hits Putin's desk.
Learning From Iran
The target for this bill being written into law is July 1st, an aggressive timeline. Leaning on cryptocurrencies to circumvent international sanctions is becoming a regular occurrence. Iran has been collecting tolls in stablecoin and their central bank has long been holding Bitcoin. Just last week though, the US successfully sanctioned stablecoins held by the Iran Central Bank.
Russia is learning from mistakes made by both themselves and Iran by keeping the entire infrastructure within their control. It remains to be seen if this solution can work or if the EU and Western countries will find a way to sanction it.
