Russia has been increasingly interested in cryptocurrency, with President Vladimir Putin recently ordering the development of a national digital currency. Russia‘s Central Bank has also been working on a digital currency, although it is not yet clear when this will be launched. There are several reasons for Russia’s interest in cryptocurrency. One is that it could help to circumvent Western sanctions, which have been imposed on Russia in response to its annexation of Crimea and involvement in the conflict in Eastern Ukraine. Another reason is that crypto could help to boost Russia’s economy, which has been struggling in recent years. Finally, digital currency could also help to increase Russia’s anonymity and, as a result, its power on the global stage.
Some readers might react to the title of this piece, ‘Russia says crypto is “safe alternative” for cross border payments‘, found in Coinjournal, with a ‘sure, what else would Russia say’ type of reply. Russia has been under heavy sanctions from various international payments systems since the invasion of Ukraine and so funds movement across borders have been restricted for the largest banks (save for energy requirements). So, when the Russian Prime minister says that cryptos can be a ‘safe alternative’ for cross-border payments one must keep that statement in the proper perspective.
‘While on one level it feels silly to talk about cryptocurrencies in Russia when there is a literal war going on, this is a crypto site….In that context, some very interesting developments have come out of Russia over the last day. Russian Prime Minister Mikhail Mishustin declared cryptocurrencies could be a “safe alternative” for cross-border payments….“We need to intensively develop innovative areas, including the adoption of digital assets. This is a safe alternative for all parties that can guarantee uninterrupted payment for the supply of goods from abroad and for export.”
The author goes on to mention that Iran also made a similar statement. It’s rather expected since that country has been sanctioned for years, given the nuclear program. But the key point is the mainstreaming of bitcoin, as an example, which is used as an example given remittance costs in El Salvador, where the country is a heavy user. The issue for larger transactions of course is the volatility of bitcoin and other cryptos, so we’ll see where this goes.
‘This brought up what can at times be a polarising subject – the use of crypto as a potential medium to evade such sanctions. These comments by Mishustin referring to crypto as a “safe alternative” will do nothing to dampen that debate….But it does demonstrate the power of crypto. I saw this first hand in my trip to El Salvador last month, where people spoke of the advantages Bitcoin offered regarding remittances. El Salvador is in the top 10 countries in the world for remittances as a portion of GDP, and the average fee on such remittances is a crazy 6.5%….’Cutting these fees out through using Bitcoin can be a huge plus to those receiving money from loved ones abroad. In Russia and Iran’s case, while remittances will be aided too, they are not as big a factor as they are for El Salvador. In their cases, the massive boon is the enhanced ability to evade sanctions.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.