Over the years, Russia has been sending mixed signals about its relationship with cryptocurrencies. Recently, it seems that the Kremlin has begun to embrace cryptocurrencies. Is this really the case?

Early crypto regulations in Russia

Until the 2020s, cryptocurrencies in Russia effectively existed in a gray area. In July 2020, President Vladimir Putin signed a Digital Financial Assets (DFA) regulation that allowed cryptocurrency transactions while prohibiting residents from using cryptocurrencies as a means of payment.

DFAs can be used by banks registered with the Central Bank of Russia, known as the Bank of Russia. Cryptocurrency transactions can only be challenged in court if possession of the cryptocurrencies is preserved and the owner declares the transactions.

In February 2022, the Russian Central Bank issued a consultation paper entitled “Cryptocurrencies: Trends, Risks and Regulation.” He points to Russia's leading role in mining and the fact that Russians are actively trading in cryptocurrencies. The paper also describes the potential for using cryptocurrencies in settlements as “limited,” even in the long term.

According to the bank, cryptocurrencies threaten the well-being of Russians, so ensuring complete transparency of cryptocurrency transactions is a must. The paper called for banning the creation of cryptocurrencies and cryptocurrency exchanges, banning financial institutions from investing in cryptocurrencies or crypto-related assets, and banning mining altogether.

In addition, the Central Bank urged the government to monitor the activity of Russian citizens on foreign forex platforms. The consultation paper mentioned the continued development of the digital ruble as a potential legal alternative to cryptocurrencies.

The reason why cryptocurrencies are melting

It is safe to say that the 2022 consultation paper did not shape Russia’s modern relations with cryptocurrencies. Despite the central bank's recommendations, the Kremlin took a course that was not the usual restrictive approach for Russian strategic partners such as China, Iran, Turkey, Belarus, or India.

The superficial reason behind the “crypto meltdown” is simple: Russia has become more favorable to cryptocurrencies as Western sanctions have narrowed the scope for foreign trade.

On December 25, 2024, in an interview on the Rossiya 24 TV channel, the Minister of Finance saidAnton Siluanov admitted that Russian companies are increasingly using Bitcoin in international trade, and Putin will not hinder this process. The Russian president in fact I fell the legislation Which legalized the limited use of cryptocurrencies in international trade in the summer of 2024. It was the law that allowed Russian companies and individuals to mine, buy and sell cryptocurrencies. It occurred in August It began on November 1, 2024. However, the use of cryptocurrencies as a means of payment within the country is still prohibited. Ad coding is also not allowed.

However, the need to bypass sanctions is not the only reason for the friendlier approach towards cryptocurrencies.

Bitcoin mining and undermining the dollar

Crypto is known for its independence from governments, but this is not the only reason why the Russian government resorted to using this asset that its strategic opponents cannot prevent.

For many years, Putin has been consistent Supporter of abolishing the dollar And cryptocurrencies, which he didn't like at first, but turned out to be what he needed. The US dollar is the backbone of global trade (more than half of foreign trade is conducted through the US dollar) and the world's reserve currency. But now, when the US government seeks to make Bitcoin stronger, the US dollar may face problems.

Some experts warning In the United States of America, the strength of Bitcoin can only be strengthened at the expense of the strength of the US dollar. Therefore, converting America to Bitcoin is equivalent to eliminating the dollar. What's more, foreign trade conducted via Bitcoin instead of the US dollar (which is what Russia is doing now) plays against the dollar. Since the US dollar is not Russia's national currency, the Kremlin does not lose more than America when it brings more bitcoins into the game, as bitcoins hurt the dollar more than the ruble. US efforts to create a strategic reserve of Bitcoin may only worsen the situation for the US dollar. Ukraine has already called for a ban on the use of bitcoins by Russia in international trade.

Another possible reason why the government chose to use the potential of cryptocurrencies is to support sanctioned businessmen. One of them is aluminum and energy oligarch Oleg Deripaska. Its aluminum plant, the Rusal facility, was converted into a mining farm in 2019. The enterprise is called Russian Mining Corporation. It was co-founded by Russian official Dmitry Marinichevfrom estimated RMC Mining Capacity 20% of global Bitcoin mining production.

RMC has been mentioned in the media only once, and it is not the only cryptocurrency mining company with ties to Deripaska. Betrivir is Named The largest cryptocurrency mining company, there is no evidence that BitRiver is the same company as RMC. However, the co-founder of RMC Marinichev He was summoned Deputy Director of Communications at BitRiver.

Betrivir Was punished By the US Treasury in 2022. Igor Runets, CEO of BitRiver, noted that BitRiver had no ties to the Kremlin and that the sanctions had only a competitive motive. Bloomberg Pointing Deripaska, who is close to the Russian government, played a prominent role in founding BitRiver and providing facilities for mining equipment in Bratsk, a city in Siberia whose cold climate suits mining well. The power supply for BitRiver was provided by the energy company En+, one of Deripaska's main assets.

Final thoughts

Has the crypto meltdown reached Russia? It seems so. But the thaw is far from summer or spring. Rather, it is a short period of thawing, a time for hope. Like a Khrushchev thaw, it is a time when pressures become weaker and new opportunities emerge for elites and some individuals. Time will tell what's next.