Cryptocurrencies have become an intrinsic part of our new reality. At the same time, the legal nature and preferred regulatory regime for cryptocurrencies have long been a hot topic. The treatment and legal status of cryptocurrencies varies across different jurisdictions, from categorization as a means of payment or asset, to a complete ban.
Amid discussion and deliberations for regulations and legislation for cryptocurrencies, Russian businesses are seeking help from the Russia in efforts to legalize decentralized cryptocurrencies like Bitcoin. Their request has been included in the annual report of Russia’s Business Ombudsman, Boris Titov, to President Vladimir Putin.
The recommendations were laid out in a paper titled “Key Business Problems under Sanctions and Structural Transformation in 2023” produced by the Institute of the Commissioner for the Protection of Rights of Entrepreneurs under the President of the Russian Federation.
Among other suggestions, the authors urge for allowing the use of cryptocurrencies in international settlements. More specifically, they propose to legalize cross-border crypto payments with a dedicated bill so that cryptocurrencies can be used in dealings with partners abroad. To achieve that, the status of such transactions needs to be determined in Russian law, they insist.
It is important to note that in this ongoing war, Russia is strategically evaluating and assessing the role of cryptocurrencies and digital assets in the financial system to eliminate the impact of Western sanctions to facilitate trade with countries. According to a report published by Forbes, some Russian actors like Task Force Rusich, impacted by sanctions or charged with executing the war in Ukraine, are using cryptocurrencies to evade sanctions at a much smaller scale.
It was also reported that various formal and informal organizations such as Novorossia Aid Coordinating Center (NACC) in Russia together raised at least $1.8 million in crypto to supply the struggling Russian army in Ukraine with ammunition, armour, surveillance drones, optical devices, vehicles and warm clothing.
Further, KillNet, a pro-Russian cybercriminal group operating since 2021, has also been fundraising in cryptocurrencies, it was investigated that the group targeted government entities and critical infrastructure in countries opposing the invasion, through DDoS attacks against Lithuania, Poland, Japan, Norway, the Czech Republic, Moldova, and the US.
At an event in April 2023, Elvira Nabiullina, head of the Central Bank, announced that the bank is planning to use digital assets for foreign business and trade purposes. But, importantly she mentioned that this utilization is only for businesses and trade purposes and does not allow citizens to use cryptocurrencies. Though the bank denied the use of cryptocurrency during the event it can be a potential start for establishing a digital ecosystem.
It is important to note that the Russian legislation on cryptocurrency and tokens adopted in January 2021 aimed at concluding the uncertainty regarding the legal nature and regulatory regime of cryptocurrency and tokens in Russia. The new legislation outlawed the use of cryptocurrency and tokens as means of payment and set in stone their status as assets. It also imposes additional liabilities on the cryptocurrency holders, including the obligation to declare cryptocurrency to the tax authorities which may result in such cryptocurrency being subject to Russian tax.