Russia unlikely to choose Bitcoin for cross-border crypto payments: Analysis
Despite Russia pushing the idea of using cryptocurrencies for cross-border payments, it remains unclear which digital asset the government plans to adopt for such transactions.
Russian authorities are quite unlikely to approve the use of cryptocurrencies such as Bitcoin (BTC) for cross-border transactions, according to local lawyers and fintech leaders.
The Bank of Russia must control cross-border transactions
It is “highly doubtful” that Russia will allow the use of Bitcoin or other similar cryptocurrency for cross-border payments because such assets are “difficult to control”, according to Elena Klyuchareva, senior associate at local law firm KKMP.
Klyuchareva stressed that the draft amendments to the legislation on cross-border crypto payments are not available yet, while reports only say that the Bank of Russia and the Ministry of Finance have agreed on a joint approach to the issue.
The lawyer told Cointelegraph that the cryptocurrency used by Russia for cross-border payments will most likely be local, so that Russian regulators can properly monitor and control such transactions. She also suggested that only large institutional players – such as banks – will be able to comply with the requirements to make cross-border payments.
USDT and USDC are questionable since stablecoins are issued in the US
Russia should choose a cryptocurrency for cross-border settlements and at the same time eliminate all possible pressure from other countries, according to Eduard Davydov, senior partner at Emet Law Firm. As such, cryptocurrencies issued in the United States, including major stablecoins such as Tether (USDT) or USD Coin (USDC), “will not meet such requirements,” Davydov surmised.
As the world’s most decentralized cryptocurrency, Bitcoin may look more appropriate in such a context, but BTC is also associated with a number of problems such as high volatility, limited scalability as well as vulnerability to global sanctions. “Entire ranges of addresses may fall under the sanctions when they interact with which coins will be considered ‘dirty’ and counterparties may choose not to transact with such addresses or coins,” Davydov noted.
Bitcoin looks suitable because of its decentralized nature, but the volatility is too high
Sergey Mendeleev, CEO and co-founder of InDeFi Smart Bank, also believes that decentralized cryptocurrencies like Bitcoin would only make a good choice for Russia’s cross-border crypto payments if they were less volatile.
Mendeleev also said that it is difficult to imagine a situation where foreign businesses would accept payments in a Russian ruble-pegged cryptocurrency. “In any case, businesses will be able to convert any currency to Bitcoin or to Tether with one click,” he added.
The CEO also expressed hope that Russian regulators would have enough courage to allow foreign economic activity with the participation of “at least US dollar stable coins on major blockchains.” Mendeleev emphasized that InDeFi Smart Bank announced in September 2022 the creation of a decentralized cryptoruble project precisely to facilitate this idea.
Iran is one of the few countries with similar experience worldwide
Russia is among the few countries in the world that allow cross-border crypto payments while banning local crypto payments along with local crypto exchanges. However, there are a few countries that can serve as an example of a government taking a similar approach to crypto.
A good example could be Iran, which is under US sanctions, Davydov suggested, citing that Iran’s Ministry of Industry, Mines and Trade approved the use of crypto for imports in late August. The Iranian government said the new measures are aimed at helping Iran ease global trade sanctions that essentially cut the country out of the global banking system.
In August, Iran placed its first international import order using cryptocurrency worth $10 million, a senior government trade official reported. However, the official did not specify which digital currency was used for the transaction.
Meanwhile, Iran still does not officially allow its citizens to pay with cryptocurrencies such as Bitcoin. Iran’s central bank first banned the use of crypto for payments inside the country in draft crypto regulations from 2019. Like Russia, investing in cryptocurrency also remains illegal in Iran.
“Domestic cryptocurrency payments are still banned in Iran. The local government has repeatedly claimed that it implemented crypto for international transactions,” Davydov stated.
Related: Russia aims to use CBDC for international settlements with China: Report
As previously reported, the Russian government became increasingly interested in adopting cross-border crypto payments amid Western economic sanctions following Russia’s invasion of Ukraine. The Bank of Russia and the Ministry of Finance have collaborated on guidelines and rules to allow such payments, while the central bank emphasized that domestic crypto payments and crypto exchanges would not be legalized.
According to Anatoly Aksakov, head of the finance committee of Russia’s lower house of parliament, Russia may start cross-border payments in crypto as early as 2023. He allegedly suggested that companies themselves will be able to choose cryptocurrency for cross-border settlements, whether it will be Ether (ETH) or Bitcoin, or another digital currency.
