Russia to test crypto exchanges for cross-border payments

Russia is getting ready to test cryptocurrency exchanges for cross-border payments in order to sidestep international sanctions that have made traditional banking difficult. 

Starting September 1, the trials will involve using digital tokens to make and receive payments across borders, wanting to give Russian companies a new way to handle overseas transactions. 

This experiment comes as Russian businesses struggle with the complexities of global finance due to a series of sanctions that have isolated them from many Western financial systems.

Sources familiar with the plan, who spoke on condition of anonymity, revealed that Russia will use the National Payment Card System for these trials.

This system, already in place for handling ruble transactions and interbank payments, will now also facilitate the exchange between rubles and cryptocurrencies. 

The Russian parliament recently laid the groundwork for this by passing laws in July that legalized crypto mining and set up a framework for testing digital tokens under the central bank’s supervision. President Vladimir Putin signed these bills into law on August 8.

The move to embrace crypto comes just a year after Russia’s central bank pushed for a complete ban on all cryptocurrency activities.

Back in 2022, weeks before the invasion of Ukraine, the bank called for a blanket ban on the use and creation of cryptocurrencies, citing risks to financial stability and crime concerns. 

But now, the narrative has changed completely. The urgency behind this decision is clear. Russian companies are finding it increasingly difficult to pay overseas suppliers and receive payments for exports, especially since the U.S. expanded its criteria in June for sanctioning foreign banks that work with Russia. 

Finance Minister Anton Siluanov admitted on August 14 that the government is still figuring out how to legalize crypto exchanges, saying: 

“We haven’t found a solution yet on how to do this.”

Russia’s central bank established the National Payment Card System back in 2014, primarily to run the Mir payment cards and interbank systems for the country. Now, this system is set to become the backbone of the crypto exchange trials. 

It was chosen because it already has the necessary infrastructure for interbank settlements and clearings, which could easily be adapted for crypto transactions.

The central bank’s tight grip on the system ensures it remains fully regulated throughout the trials, minimizing the risks of money laundering and fraud. Putin sees more than just a workaround to sanctions in cryptocurrencies. He sees an opportunity.

The Russian leader has pointed out that digital currencies are increasingly used around the world for payments, and with the right regulations, they could become a valuable tool for Russia in international trade. 

This could potentially strengthen trade ties with partners like China and India, who have shown interest in using alternative currencies to the US dollar.