Russia will impose a severe prohibition on the widespread use of digital financial assets issued within its borders, prohibiting the circulation of cryptocurrency assets like Bitcoin.

In light of escalating geopolitical tensions, the State Duma Committee on the Financial Market Chairman, Anatoly Aksakov, is spearheading this endeavour, which is a part of a larger government push to regulate the cryptocurrency ecosystem.

Digital currency and financial assets issued under Russian law are permitted. The country now uses cryptocurrencies as a quasi-currency to replace the ruble, which is why a ban is necessary.

However, this decision has been made since only the Russian ruble achieves the goal of the monetary unit.”

The bill will make exceptions for test projects funded by the Central Bank and cryptocurrency miners within an experimental legal framework, as crypto mining significantly boosts Russia’s tax revenues.

According to data from Statista, crypto miners produce over $2.59 billion in liquidity for foreign trade settlements in Russia.

However, there is an intense internal debate among Russian policymakers regarding this approach. Artem Kiryanov, Deputy Chairman of the State Duma Committee on Economic Policy, stressed the importance of precise regulations.

“The regulation of cryptocurrency should be prescribed in the digital code, which would clearly spell out the conceptual apparatus and common judicial law enforcement practice,” Kiryanov said.

In contrast, Russia’s Finance Minister, Anton Siluanov, has pushed for a more moderated stance, advocating for regulation to enable the use of cryptocurrencies in both domestic and international transactions.

Elvira Nabiullina, Head of the Bank of Russia, also supports the experimental use of cryptocurrencies in international settlements.

Recent reports indicate that Russian entities have used cryptocurrencies, particularly Tether’s USDT, to procure critical components for military technology.

In one notable case, Andrey Zverev, a Russian operative based in China, used USDT in 2022 to bypass traditional banking channels and purchase drone components essential for military operations in Ukraine, avoiding the scrutiny typically associated with sanctions-wary financial institutions.