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At first glance, Bitcoin appears to be a good fit for Russia's crypto cross-border payments, but this option is very dubious for a variety of reasons.
Despite Russia advocating for the use of cryptocurrencies for cross-border payments, it is yet unknown precisely which digital asset the government intends to use for these exchanges.
According to local lawyers and fintech executives, it is highly improbable that Russian authorities will permit the use of cryptocurrencies like Bitcoin (BTC) for international transactions.
The Bank of Russia must monitor International trade
According to Elena Klyuchareva, a senior associate at the regional legal firm KKMP, it is "very questionable" that Russia would permit the use of Bitcoin or any other cryptocurrency for cross-border payments because such assets are "impossible to monitor."
Klyuchareva underlined that while reports simply claim that the Bank of Russia and the Ministry of Finance have agreed on a consistent approach to the problem, the draft modifications to the legislation on cross-border crypto payments are yet unavailable.
According to the lawyer, Russia would likely employ local cryptocurrencies for cross-border payments so that Russian regulators can effectively monitor and regulate such activities. She also asserted that the only institutions that can meet the requirements for conducting cross-border transfers are the big ones, like banks.
Given that the stablecoins are minted in the US, USDT and USDC are dubious.
Eduard Davydov, the senior partner at Emet Law Firm, believes that Russia should pick a cryptocurrency for cross-border settlement while removing all outside pressure. Therefore, significant stablecoins like Tether (USDT) or USD Coin (USDC), as well as cryptocurrencies launched in the US, will "not meet such requirements," according to Davydov.
Bitcoin, the most decentralized cryptocurrency in the world, could seem more appropriate in this situation, but BTC is also linked to a number of problems, including high volatility, restricted scalability, and susceptibility to international sanctions. Davydov observed that "entire arrays of addresses may fall under the sanctions when interacting with which the coins will be regarded 'dirty,' and counterparties may opt not to make transactions with such addresses or coins."
Due to its decentralized character, Bitcoin appears to be appropriate, but its volatility is too high.
Decentralized cryptocurrencies like Bitcoin, according to Sergey Mendeleev, CEO and co-founder of InDeFi Smart Bank, would only be a wise choice for Russia's crypto cross-border payments if they were less volatile.
Mendeleev also noted that it’s impossible to envisage a situation where international businesses would accept payments in a Russian ruble-pegged cryptocurrency. Businesses would be able to instantly change any cash into Bitcoin or Tether, he continued.
The CEO said that he hoped Russian officials would have the guts to let international trade including "at least U.S. dollar stablecoins on major blockchains." Mendeleev emphasized that the launch of a decentralized cryptocurrency ruble project by InDeFi Smart Bank in September 2022 was announced specifically with the intention of streamlining this concept.
Iran is one of the few nations in the world having such experience.
Russia is one of the only nations in the world to permit international cryptocurrency transfers while outlawing domestic cryptocurrency transfers and local cryptocurrency exchanges. However, a few nations can be used as examples of governments that treat cryptocurrencies in a similar way.
Davydov made the comment in reference to Iran's Industry, Mines and Trade Ministry's approval of the use of cryptocurrency for imports in late August. Iran is subject to U.S. sanctions. The new restrictions, according to the Iranian government, are intended to assist Iran lessen the effects of international trade sanctions that have effectively cut the nation off from the world banking system.
According to a top government trade official, Iran placed its first ever international import order in August using bitcoin valued at $10 million. However, the official did not specifically state which digital money was utilized in the transaction.
Iran continues to forbid citizens from utilizing cryptocurrencies like Bitcoin to make payments. In draft cryptocurrency laws from 2019, Iran's central bank for the first time forbade the use of cryptocurrencies for domestic payments. Iranian cryptocurrency investment is still prohibited, just like it is in Russia.
Iran continues to forbid domestic cryptocurrency transactions. In order to facilitate international transactions, the local administration allegedly developed crypto, according to Davydov.
As was previously reported, in response to Western economic sanctions following Russia's invasion of Ukraine, the Russian government developed an increased interest in implementing cross-border cryptocurrency payments. While the central bank emphasized that domestic crypto payments and crypto exchanges would not be legalized, the Bank of Russia and the Ministry of Finance have been working together to develop laws and regulations that would permit such payments.
Anatoly Aksakov, head of the lower house's finance committee, claims that Russia may begin accepting cryptocurrency for cross-border payments as early as 2023. According to reports, he said that companies will be free to select the cryptocurrency for cross-border settlements, whether it would be Ether (ETH), Bitcoin, or another digital money.
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