Russia’s relationship with crypto has been a rollercoaster, especially throughout 2022. Leaders of the country have been butting heads on the issue of digital currency for a while now. Some have stayed firm in their assertions that crypto is no good, while others are convinced it is a powerful asset. President Vladimir Putin has swayed both ways on the problem in recent months. Today marks one definitive decision on the debate, though, as Russia bans crypto payments.
The crypto conversation in Russia has been rich this year. In January, government officials began to seriously weigh the value and risks present in the industry. Talks of the usefulness of a state stablecoin, crypto mining, crypto as payments and more started to take off. This in turn led to an agreement among officials to create a roadmap on crypto regulations.
Adding to the conversation in a major way is the country’s decision to invade neighboring Ukraine. As the latter put up more of a fight against the military powerhouse than expected, Russia has likely been been tapping more manpower and resources than it anticipated needing. The country has also been economically impacted, if only temporarily, by ongoing sanctions from the U.S. and E.U.
Some in the country view crypto as a means of achieving economic prosperity. Utilizing Russia’s sizable reserves of non-renewable energy for crypto mining can and has led to profitable output, for example. As recently as last month, the country has struck deals with private Russian crypto mining outfits to provide power for mining. While Putin has backed crypto for these very reasons, he is signing into law a bill that seems like a major step backward.
Russia Bans Crypto Payments and Slams Stablecoins
Putin is becoming bullish on the crypto mining industry. So, one might expect the Russian leader to soften his stance on other aspects of crypto. However, as Russia bans crypto payments, it appears unlikely the country will ever embrace the market for domestic uses.
Earlier today, Putin signed into law a bill banning the use of cryptocurrency as a means of payment. According to reports, the bill institutes “prohibition against the introduction of other monetary units or monetary surrogates on the territory of the Russian Federation.”
This wording essentially strikes down the potential for a Russian stablecoin as well, thus killing two massive potential areas of crypto expansion in the country at once.
The Bank of Russia certainly has no qualms about this implicit ban. This week, representatives said stablecoins are high-risk and not so stable. They say since underlying assets do not belong to the stablecoin holder, “redemption at the nominal price of the assets in collateral is not guaranteed, and the price of a stablecoin is not actually stable.”
Putin’s decision to sign the bill might be a bit confusing to some. Indeed, Russia is still embracing crypto mining with open arms. The Bank of Russia is supporting the legalization of mining activities. However, it wants to require miners to sell their assets abroad using non-ruble fiat currencies. Governor Elvira Nabiullina’s comments that the activity should not “penetrate” the Russian financial system. It seems this activity is welcome only because it puts no Russians at risk with its volatility.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.