RUSSIA WILL EXPERIMENT WITH CRYPTOCURRENCY-BASED INTERNATIONAL PAYMENTS BY END OF YEAR

Fri 18 October 2024:

Russia is preparing to take a bold step in the financial world by conducting its first experimental international payment using cryptocurrency before the end of 2024. This announcement came from Elvira Nabiullina, the head of the Russian central bank, during a press conference in Moscow.

While discussing the experiment, Nabiullina emphasized the growing interest from trade participants in this new form of payment. However, she remained tight-lipped on further specifics, citing commercial confidentiality.

“We expect that the first transactions will take place before the end of this year. There is interest among the participants, but since this experimental legal regime concerns international settlements, we keep it closed, we do not disclose information on participants, and on the number of transactions,” Nabiullina stated.

The experiment is expected to last up to three years, providing the Russian bank regulator ample time to evaluate its success. Based on the results, the Bank of Russia could potentially roll out the use of cryptocurrency for broader use in international payments.

“The decision could be made earlier, if the results of the experiment allow it,” Nabiullina added, suggesting flexibility in the timeline.

This development follows Russian President Vladimir Putin’s approval of legislation in August that legalized the experimental use of cryptocurrency in international payments and forex transactions. The Bank of Russia will oversee and regulate the entire process as the country ventures into this new financial territory.

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Since the imposition of international sanctions on Russia, particularly following its invasion of Ukraine, the country has faced financial isolation from Western banking systems. In response, Russia has explored alternative solutions like cryptocurrencies to bypass these restrictions and maintain international trade.

Sanctions cut Russia off from SWIFT, the global banking communication system, limiting its ability to process payments in traditional currencies. Cryptocurrencies offer a decentralized option that isn’t controlled by any central authority, making them a potential tool to evade these financial barriers.

In August 2023, Russia legalized the experimental use of cryptocurrencies in international payments, signaling a strategic move to use digital currencies for foreign trade and to ease economic pressure. However, there are concerns that widespread crypto use could face its own set of regulations from global authorities aiming to block sanction evasion.

In short, cryptocurrencies may help Russia navigate sanctions, but the success and global response to this approach remain uncertain.

SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES

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