In a new report, analysts at Chainalysis highlighted the adoption of “significant” laws in Russia that legalise mining and the use of cryptocurrencies for international payments.
The company noted that the new direction represents a “significant departure” from the government’s previous stance, when in 2022 the Central Bank of Russia advocated for a complete ban on digital assets.
“[President Vladimir] Putin urged Russia to ‘not miss the moment’ in cryptocurrency regulation, emphasising their growing role in global payments and potential to reduce dependence on the US dollar. Key officials, including the bill’s author Anton Gorelkin and Central Bank head Elvira Nabiullina, specifically noted that this legislative change aims to mitigate the impact of sanctions and facilitate international payments,” the report states.
From Hostility to Acceptance
Despite the new legislation, the ban on using digital assets for domestic transactions in Russia remains in place, yet this has not diminished their widespread use, Chainalysis pointed out.
Russia continues to rank among the leading countries in the annual Global Crypto Adoption Index.
“[…] total bans on digital assets are often ineffective as they do not significantly restrict their use but rather push them into informal or less regulated channels,” analysts concluded.
According to researchers, even before the law was passed, “banking services related to cryptocurrency” were growing in Russia. Citing Vedomosti, Chainalysis indicated that Rosbank, owned by Russian billionaire Vladimir Potanin, “paved the way for cross-border crypto payments for businesses last June, with several other banks subsequently introducing similar services.”
The Central Bank is leading the initiative to integrate cryptocurrency into Russia’s financial system, experts noted. To this end, the Bank of Russia has created an experimental infrastructure that allows approved Russian enterprises and organisations to use digital currencies for international trade.
“These recent legislative efforts to promote cryptocurrencies are part of Russia’s broader project to develop alternative payment mechanisms to alleviate the pressure of Western sanctions and reduce dependence on the US dollar, which is a long-term goal, especially amid growing geopolitical tensions,” Chainalysis added.
Researchers believe the new legislation “consolidates control” of the Central Bank of Russia over cryptocurrency in the country, allowing it to “carefully regulate and monitor transactions.” Meanwhile, a national digital currency is being tested, with its launch planned for 2025.
Additionally, Russia is exploring various methods to bypass the “US-controlled financial system,” including blockchain-based initiatives with the BRICS community and a potential launch of a gold-backed stablecoin with Iran.
Exchange Agents
Chainalysis emphasised that authorities are exploring ways to legalise cryptocurrency trading platforms, but have yet to find a unified solution. Nevertheless, Russia is “moving forward” with plans to launch two new crypto exchanges in St. Petersburg and Moscow.
Analysts added that Russia already has a “thriving” cryptocurrency ecosystem despite regulatory ambiguity:
“Some of the largest non-KYC-compliant Russian exchanges like Tetchange, 100btc, Bitzlato, Suex, and Garantex are located in the ‘Federation’ tower […]. While some of these services, including Suex OTC, have seen reduced activity following US Treasury sanctions, others like Garantex have maintained a stable level of operations.”
Researchers claim that Garantex is a “central player” in the Russian cryptocurrency market and is likely to remain so despite international restrictions.
“Although Garantex has processed nearly $100 billion in transactions since 2018, this large-scale activity does not necessarily equate to state-sponsored sanctions evasion on a grand scale and should be assessed with caution. It is important to note that not all Garantex users are Russian citizens or located in the country, and they do not act on behalf of the government,” the company clarified.
Exved is another exchange that aids in sanctions evasion, according to Chainalysis. Analysts assert that it closely collaborated with Indefibank, whose co-founders “include Garantex founder Sergey Mendeleev and former KGB officer and media mogul Alexander Lebedev.” Exved facilitated imports and exports even before the new legislation was enacted, researchers believe.
In a comment to ForkLog, Indefibank CEO Sergey Mendeleev noted that he has had no connection to Garantex for over four years and questioned the competence of the Chainalysis investigation.
“The cryptocurrency business in Russia has had mixed success amid changing legislative positions. On one hand, Garantex represents a success story, while other global exchanges have exited the Russian market, citing compliance issues […]”, analysts noted.
Widespread Evasion
The move to integrate cryptocurrency into the financial system could improve Russia’s position in circumventing restrictions. However, large-scale sanctions evasion remains highly unlikely, given that Russia’s total currency reserves “amount to just under half a trillion dollars,” researchers clarified.
“[…] there is simply no liquidity in the current Russian cryptocurrency markets to conduct such large transactions,” experts explained.
Nonetheless, smaller-scale sanctions evasion “can still have significant implications for national security, compliance, and investigations.” According to Chainalysis, government entities will attempt to use “new developments and intermediaries.”
As an example, they cited instant exchanges without KYC. This means users can “effectively avoid bans on fiat operations of sanctioned Russian banks.”
“Russia’s pivot towards cryptocurrency represents a calculated response to Western sanctions, aimed at an alternative financial system less reliant on the US dollar. The success of the initiative depends on how effectively authorities can navigate regulatory hurdles, manage sanctioned entities, and build the necessary infrastructure and foreign partnerships to support such transactions,” Chainalysis concluded.
Russian “Sber” has supported recognising cryptocurrencies and stablecoins as legitimate payment instruments.
It was previously reported that by 2030, Rosfinmonitoring will receive 10.61 billion rubles to develop a digital platform to combat money laundering. One of its functions will be monitoring cryptocurrency transactions to ensure the de-anonymisation of bitcoin wallet owners.