Russian President Putin approved a law change banning the use of bitcoin for payments in Russia. It is yet another development in Russia’s increasingly complex attitude to Bitcoin.

The Russian State Duma’s website reports that Putin approved an amendment to the law that suspends certain parts of the legislation “regarding banks and banking activities,” making it illegal to pay for goods and services with bitcoin in Russia.

The amendment was introduced a month ago and has already been approved by parliament and the State Duma.

It seems to meet the objections of the Russian central bank. He is not a fan of Bitcoin and has been warning for some time about the risk of money laundering and the possible risks for citizens. The central bank therefore alluded to a total ban, but Putin put a stop to that

Mining

Russia has a “competitive advantage” in bitcoin mining, according to Putin, because of the large energy reserves in the country. He therefore pushed for regulation. It seems that the focus is on fairly mild regulations for the mining sector, where a simple company registration is sufficient

It is probably hoped that this will attract more miners to the country in order to increase the local market for Russian energy producers. This is interesting for Russia, because the export of Russian energy has been hampered by sanctions.

The IMF warned in a report that Russia could still convert energy stocks into money in this way. Shortly afterwards, the US imposed sanctions on a mining company operating in Russia

International payments

There also seems to be a growing interest in Russia for using bitcoin for international payments. Ivan Chebeskov, head of the financial policy department of the Ministry of Finance, said last month that this is being discussed at a high level.

Earlier, the chairman of the Energy Committee of the Russian Duma also indicated that countries that are ‘friendly’ to Russia may be allowed to pay for Russian energy with bitcoin.

Even the Russian central bank agreed. Central Bank Deputy Governor Ksenia Yudaeva said the central bank “has no objection in principle to the use of cryptocurrencies in international transactions.” She did emphasize concerns about the use of cryptocurrency within the country itself.

No bitcoin payments in Russia

The new ban on bitcoin payments seems to respond to those concerns: paying with bitcoin for goods and services is not allowed in Russia. The rest of the regulation is still under discussion.

Russian citizens may be allowed to own bitcoin, but mainly as an investment object. Another bill from the Ministry of Finance, which has not yet been approved, provides for a licensing regime for companies that offer trading opportunities and strict Know-Your-Customer (KYC) rules. Purchase limits would also apply to consumers, with a mandatory knowledge test determining the size of the limit.

The central bank, however, submitted its own and much stricter bill. In it, the central bank is committed to a ban ‘on the issuance and circulation’ of digital currencies. Bank transfers to legal entities involved would also be prohibited.

The coming period will show which line will receive more support.

Sovereignty for Russia, not for Russians

Much is still unclear, but the Russian attitude towards Bitcoin is taking shape. The Russian government seems interested in the freedom and sovereignty that Bitcoin offers, but at the same time it is fearful that Bitcoin will be used by the country’s residents because of those same properties.

Perhaps that is not very surprising given the strict Russian regime. Contradiction, dissidents and political opponents are hardly tolerated in Russia. Bitcoin turns out to be a solution for opponents, because it is an alternative payment network outside the Russian banking system, where censorship and confiscation are not possible.

That is of course a thorn in the side of the strict Russian regime. Supporters of Alexei Navalny, Putin’s main political opponent, therefore turned to cryptocurrencies for fundraising.

However, it later emerged that they had used an international exchange that passed on data to the Russian intelligence services. Although Bitcoin addresses are not linked to personal identities on the Bitcoin network, exchanges do know which Bitcoins they have sold to whom due to KYC regulations.

Also read our previous articles about Russia!