Bank of Russia Rejects Idea of Using Cryptocurrency to Circumvent Sanctions

The Central Bank of Russia has turned down a proposal to allow the use of digital currencies for the purpose of sanctions evasion. The monetary authority believes this is hardly an option as Western regulators are already taking steps to prevent such transactions.

Bank of Russia considers it impossible to use cryptocurrencies to circumvent financial restrictions imposed over the military conflict in Ukraine. That’s according to a statement by the central bank’s First Deputy Governor Ksenia Yudaeva, issued in a reply to a proposal by a member of the State Duma, the lower house of Russian parliament.

Anton Gorelkin, a lawmaker from the ruling United Russia party, had suggested that Russian companies and individual entrepreneurs should be allowed to make payments in digital currencies, including for settlements with foreign partners. He thinks the establishment of a Russian national crypto infrastructure in response to the sanctions introduced by the West is inevitable.

Central bank officials are convinced, however, that transfers of large amounts of money in cryptocurrency by Russian businesses would not be feasible. Quoted by the RIA Novosti news agency, Yudaeva pointed out that regulatory authorities in the EU, U.S., U.K., Japan, and Singapore have started to implement preventive measures.

Digital asset platforms such as crypto exchanges are also adopting restrictions amounting to denial of access to funds for Russian users, she added. And even in jurisdictions where crypto payments are not banned at the moment, authorities are setting ever higher standards for crypto service providers regarding compliance with customer identification rules.

The Central Bank of Russia (CBR) remains a strong opponent of the legalization of cryptocurrencies. In January, the financial authority proposed a blanket ban on crypto-related operations in the country. It maintains that decentralized digital currencies like bitcoin cannot be used in payments for goods and services.

With its hardline stance on the matter, the CBR has found itself in isolation among government institutions in Moscow. In February, the federal government approved a regulatory plan based on the Finance Ministry’s concept which favors regulation under strict oversight, over prohibition.

Days before the Russian army crossed the Ukrainian border, the ministry submitted a new bill “On Digital Currency” tailored to comprehensively regulate the country’s crypto market. In mid-March, another Russian lawmaker working on the upcoming crypto regulations, Alexander Yakubovsky, suggested that cryptocurrencies could help Russia restore its access to global finances.

Do you expect Bank of Russia to change its attitude towards cryptocurrencies if Western sanctions continue to expand? Share your thoughts on the subject in the comments section below.