Putin Bans Digital Asset Payments in Russia

Russian President Vladimir Putin recently signed a law banning crypto payments, prohibiting exchange operators from processing transactions supporting the use of digital financial assets (DFAs) as a payment method in Russia, according to the local news portal RBC.

While “monetary surrogates” are already prohibited in Russia, the new legislation marks the first explicit ban on digital asset payments.

Putin Bans Digital Assets as a Means of Payment

According to newly-approved legislation, the Russian leader has imposed a direct ban on the use of DFAs as a means of payment in Russia. The prohibition also involves utilitarian digital rights (UDRs).

The move comes a few months after Russia drafted legislation recognizing crypto as a form of currency, but with “strict obligations for all participants.” Just a month before that, Russia’s central bank proposed banning miners and certain crypto operations due to concerns that they could jeopardize the country’s financial system.

While the new ban applies to DFAs and UDRs, Moscow hasn’t imposed extensive regulations on cryptocurrencies yet. The country’s policymakers are expected to review new legislation dubbed “On Digital Currency” which is set to address the regulatory gaps.

Approved today, the new legislation was filed last month with the Russian parliament’s lower house by Anatoly Aksakov, Chairman of the Committee on Financial Markets of The State Duma. The new law is expected to come into effect in 10 days, according to the report.

While the legislation forbids the use of digital financial assets to pay for “transferred goods, performed works, rendered services,” it leaves room for other use cases of DFA payments. Earlier this month, the Russian financial regulator said it was willing to accept the use of digital assets for settlements with international partners.

The proposal to use cryptocurrencies in international settlements has been well received amid harsh sanctions imposed on Russia by the west following its invasion of Ukraine. On the other hand, the majority of government agencies in Russia still think that the ruble should remain the only legal tender.

More Digital Currency Regulation Laws Are In the Works

Following the ban on DFA payments, Russia’s lawmakers continue to work on other legislation targeting digital assets. The upcoming bill “On Digital Currency” is expected to comprehensively regulate the digital asset market in the country, while the “On Mining in the Russian Federation” is set to impose new rules on mining block rewards.

Last year, Russia’s financial monitoring agency introduced a crypto monitoring service, aimed at integrating “the mechanism for the circulation of digital currencies into the financial system and ensure control over cash flows in the circuit of credit institutions.”

The agency said last week it plans to improve the capabilities of its crypto monitoring service amid the ongoing “cryptomania.” Aksakov compared cryptomania to the addiction in the gambling sector, which is also highly regulated in Russia.

Do you think digital assets should be more regulated? Let us know in the comments below.

About the author

Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.