Russian President Bans Cryptocurrency as a Means of Payment

Russian President Vladimir Putin signed a bill into law preventing the use of digital assets as a means of payment

According to the explanatory note on the draft law, the bill prevents “the use of digital financial assets… as a means of payment.”

• Specifically, it establishes a direct ban on the “transfer or acceptance of” digital financial assets as compensation for work, goods, or services.
• The note reinforces the primacy of the ruble as Russia’s official monetary unit.  “This article also establishes a ban on the introduction on the territory of the Russian Federation of other monetary units and the issuance of monetary surrogates,” it continues.
• The bill was submitted to the State Duma in early June, and passed its first reading by June 16th. Next, the Federation Council passed it as law on July 6th, and President Putin signed it on Thursday.
• Putin has previously shown interest in cryptocurrencies. He claimed in October that they “had the right to exist and can be used as a means of payment.”
• However, Russia’s central bank has long opposed digital assets that take any form besides the Russian Ruble. It believes the circulation of other currencies within the financial system can lead to economic instability.
• Despite proposing an outright ban on the crypto sector in January, the State Duma rejected the idea in favor of regulation.
• The Bank of Russia has since adjusted its views, believing that Bitcoin can be advantageous to Russia for mining, and international payments. However, it maintained until last month that citizens should not have the permission to use them.

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Putin has also recognized that mining may be beneficial to Russia due to its vast energy resources and cold climate.