Resource-rich Russia is facing mounting financial pressures because of its geopolitical problems with Ukraine, including the flurry of sanctions that have hit the country in the last two weeks. One response that Russia is looking at is to develop its own regulate Cryptocurrency market.
Digital currency is gaining traction globally, and with many hidden benefits, Russia may use the currency as a way around existing sanctions. Let us see why cryptocurrency in Russia may be one of Russia's main alternatives to NATO-backed currencies.
Why is Russia Moving Towards Cryptocurrency Regulation?
Cryptocurrencies are already popular in Russia. In fact, Russia is one of the top crypto mining nations worldwide. With this comes concern of the digital currencies being used for illicit trade and activity. While the central bank of Russia had been pushing to ban cryptocurrency prior to the Russia-Ukraine conflict, the finance ministry is now preparing to regulate the market instead.
By establishing a legal market for digital currency, Russia may be able to counter current financial restrictions. Binance, the largest global cryptocurrency exchange, is now affiliated with the Association of Russian Banks in order to share its regulatory expertise with Russian regulators.
There have been reports of illegal funds flowing into the Russian economy through the dark web, much of which is funded by cryptocurrency. Many cryptocurrencies and their associated programs mask transaction sources, paving the path for money laundering and other illegal transfers to take place.
What is the Future of Digital Currencies in Russia?
Digital currencies could help support Russian citizens who are bearing the brunt of the damage caused by sanctions. However, introducing cryptocurrency through legal channels means Russian officials could also circumvent the impact of sanctions.
Sanctions carry less meaning in regions that have already legalized cryptocurrencies. Such is the case in Russia, where multiple digital currency-related tools are already available and about to be made legal. The Russian government is already in the progress of developing its own official digital currency. The so-called digital ruble could be used to trade with other nations without the need for the US dollar.
But one other significant factor that is particularly relevant to Russians while facing sanctions is anonymity. As the United States has already barred Russian investors from entering many financial markets, a legalized digital currency allows Russians to keep their transactions anonymous, as crypto uses blockchain technology. Furthermore, digital currencies can also be used by Russians to purchase goods and services in the face of the current runs on Russian banks.
Conclusion
While it is tough to say how the present situation turns out in the nearby future, it is safe to say the move to regulate digital currency in Russia will reduce the effect of sanctions on the country. Irrespective of how the current conflict turns out, Russia's move to regulate cryptocurrency may be one of the best financial decisions the country has made recently.
