1. Before the Russia-Ukraine conflict: Recognizing cryptocurrencies as financial assets, implementing strict regulation.
Before the Russia-Ukraine conflict, the regulatory policy only recognized the property attributes of cryptocurrencies. Before 2017, cryptocurrencies were subject to strict controls. Initially, the Central Bank of Russia was very cautious about cryptocurrencies (virtual currencies), believing they were highly volatile and posed significant financial risks, while also fearing their use in illegal activities such as money laundering and terrorist financing.
In May 2017, the Central Bank of Russia stated: 'As virtual currencies have been released into the market and due to their lack of gold reserves and uncontrolled quantities, regulation of virtual currencies should be strengthened.'
In 2018, the Ministry of Finance and the Central Bank of Russia had a divergence in policy direction. The Ministry of Finance led the drafting of the 'Digital Financial Assets Law', aimed at clarifying the regulatory requirements for digital assets (cryptocurrencies) and Initial Coin Offerings (ICOs), to regulate the creation, issuance, storage, and circulation processes of digital financial assets. However, the policy stance of the Central Bank of Russia was not consistent with that of the Ministry of Finance, as the Ministry advocated for a more lenient regulatory approach towards cryptocurrencies, while the Central Bank preferred strict control, even suggesting a ban on the issuance and trading of cryptocurrencies.
Starting in 2020, the property attributes of digital assets were recognized. In July 2020, Russia passed the 'On Digital Financial Assets, Digital Currency and Amendments to Certain Legislative Acts of the Russian Federation' (i.e., the 'Digital Financial Assets Law'), which came into effect in January 2021, clearly recognizing digital financial assets as property, thus legalizing cryptocurrency trading in Russia. Nevertheless, the Central Bank of Russia's attitude towards digital asset trading remained passive. In December 2021, the Central Bank explicitly stated in its report that it prohibited mutual funds from investing in cryptocurrencies, warned of risks associated with cryptocurrencies, and even proposed a complete ban on cryptocurrency mining and trading.
In January 2022, the Central Bank of Russia released a consultation document (Cryptocurrencies: Trends, Risks, and Regulation), identifying four major risks associated with cryptocurrencies: the high volatility of cryptocurrency prices, significant fraudulent activities in transactions; the process of 'cryptofication' akin to dollarization, impacting monetary policy sovereignty; the development of cryptocurrencies leading to financial disintermediation, thereby affecting the ability of the financial system to serve the real economy; and the widespread use of cryptocurrencies in illegal activities, posing challenges to anti-money laundering and anti-terrorist financing systems (Bank of Russia, 2022).
In response, the Central Bank of Russia proposed the 'Three Prohibitions': prohibiting Russian legal entities and residents from using cryptocurrencies as payment means for goods and services; prohibiting the issuance and circulation of cryptocurrencies organized within the Russian Federation; and prohibiting financial institutions from investing in cryptocurrencies and related financial instruments, as well as conducting cryptocurrency transactions using Russian financial intermediaries and Russian financial infrastructure. This indicates that although the (Digital Financial Assets Law) allows cryptocurrencies to act as financial instruments and facilitate trading and circulation through registered cryptocurrency exchanges and wallet service providers (including credit institutions) in Russia (i.e., serving as a means of value storage), they cannot be used for domestic goods and service payments (i.e., they cannot serve as payment means), and at this time, the Central Bank of Russia will also implement strict regulatory practices (such as not authorizing credit institutions to provide cryptocurrency services and not allowing cryptocurrency mining issuance, etc.).
2. After the Russia-Ukraine conflict: To break free from Western sanctions, supporting the use of cryptocurrencies for cross-border payments.
Western sanctions prompted a shift in Russia's cryptocurrency policy. After the outbreak of the Russia-Ukraine conflict, the West froze approximately $300 billion of the Russian Central Bank's foreign exchange reserves, excluded Russia from the global interbank payment system SWIFT, and gradually expanded sanctions to key sectors such as energy, finance, and defense, severely limiting the ability of Russian companies, individuals, and banks to access international capital markets.
As a result, under the push of President Putin, the attitudes of the Central Bank of Russia, the Ministry of Finance, and other departments became more unified, accelerating the shift in cryptocurrency regulatory policy after 2022. Russia's cryptocurrency policy began to shift in 2022. In February 2022, Russia amended the 'Digital Currency (Cryptocurrency)' bill, proposing to identify qualified investors through examinations, allowing qualified investors to purchase up to $7,000 worth of cryptocurrencies annually, while unqualified investors were limited to $600, and requiring digital currency (cryptocurrency) operating platforms to meet certain capital requirements, such as exchanges retaining at least 30 million rubles in capital, and digital trading platforms or auction platforms retaining at least 100 million rubles in capital.
In 2024, Russia allowed cryptocurrencies to be used for cross-border payments. As 2024 progressed, with the increase of secondary sanctions from the West, payments for imported goods in Russia became more difficult, leading to delays in payments which caused the growth rate of Russian imports to decline continuously starting from the second half of 2023, especially showing significant negative growth in the first and second quarters of 2024. To address this, Russia actively promoted relevant policy bills concerning the internationalization of the digital ruble (CBDC), legalization of mining, compliance regulation of exchanges, and applications of blockchain technology.
In July 2024, the State Duma of Russia officially passed the 'Cross-Border Payment Bill for Digital Currencies (Cryptocurrencies)' and the 'Cryptocurrency Mining Legalization Bill'. Starting in August 2024, the Russian government actively promoted the establishment of two major cryptocurrency exchanges in Moscow and St. Petersburg, to advance the application of cryptocurrencies in international trade.
After the legalization of cryptocurrencies for cross-border trade payments in Russia starting in September 2024, Russian companies can more conveniently use Bitcoin and other digital currencies for cross-border payments (typically through direct settlements using Bitcoin, Ethereum, and stablecoins, or converting other countries' currencies into Russian rubles using cryptocurrencies and stablecoins). It is expected that the inflow of cryptocurrencies into Russia from July 2024 to June 2025 will exceed the $182.44 billion received in the previous 12 months. Correspondingly, the scale of imports in Russia is expected to return to positive growth starting from the third quarter of 2024.
In February 2025, the Ministry of Energy of Russia proposed to establish a comprehensive registration system for cryptocurrency mining equipment, requiring all miners to use registered hardware, thus more effectively monitoring domestic mining activities and their developments in various regions. In the same month, the Energy Committee of the State Council of Russia announced plans to establish dedicated power stations for cryptocurrency mining activities that would not connect to the public grid, to address the 'out of control' state of electricity use for mining in some regions of Russia.
On March 5, 2025, the Ministry of Finance of Russia disclosed that it was discussing with the Central Bank the launch of domestic cryptocurrency trading within an experimental legal framework, where trading participants would belong to the 'super-qualified' investor category, with the criteria for qualification still being developed.
The current cryptocurrency holding rate in Russia is 6.06%, lower than the global average level (6.9%), indicating significant room for market development in the future.
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