The Russian government has established a focus group to investigate the potential of crypto payments in foreign commerce under an experimental legal regime (EPR). The nation established the group, which consists of exclusive importers and institutions.
This is based on a law implemented in Russia that permits the use of cryptocurrency for foreign trade settlements. However, its operation is still pending complete regulation.
Russia’s New Initiative to Address Payment Challenges for Dual-Use Goods
According to Vedomosti on September 17, the initiative aims to remove the payment challenges faced by importers dealing with dual-use products subject to international restrictions and having both civilian and military applications.
The government established the foreign trade group emphasizing importers of products with the potential for military applications.
Importers from the Russian Chamber of Commerce and Industry (CCI), the Association of Developers and Producers of Electronics (ARPE), and numerous institutions comprise the focus group.
The involvement of foreign financial institutions is uncertain; however, the initiative concentrates on importers who handle sensitive transactions for banks in China and other countries.
Importers specializing in dual-use products, capable of serving civilian and military functions, comprise the focus group’s membership. As a result, international payments are more complex.
In this experimental phase, the focus group participants were chosen based on their business turnover, with a preference for larger companies.
The timeline for scaling the experiment remains to be determined, even though plans to expand the group and include more participants are in place.
Russia has stepped up its efforts to implement cryptocurrency for foreign trade payments in response to China’s prohibition of unregulated civilian drones, which took effect on September 1.
The trade of drones has become more sensitive due to their use in military operations, which has further complicated international transactions.
Russia’s transition to cryptocurrency payments is a reaction to the conventional trade channels affected by U.S. sanctions and concerns regarding secondary sanctions.
According to reports, Russia’s greatest unsanctioned metal producers have commenced using Tether (USDT) for cross-border transactions with Chinese partners, thereby circumventing restrictions associated with the U.S. dollar and the yuan.
Since implementing SWIFT sanctions shortly after Russia invaded Ukraine, the Kremlin has encountered difficulties concluding trade agreements with the yuan.
The fear of U.S. sanctions has led to an increase in the refusal of Chinese counterparties to receive payments, resulting in approximately 80% of Yuan-denominated payments being returned to Russia.
A law was enacted in Russia on September 1 to address these issues, allowing cryptocurrency to be used in foreign commerce. However, full regulation is still pending.
According to Anatoly Aksakov, Chairman of the State Duma Financial Market Committee, the Central Bank and Ministry of Finance are crafting bylaws to establish cross-border crypto payment regulations.
To safeguard the market from illicit activities, such as drug or arms trafficking, these regulations, which are anticipated to be implemented by November, will initially restrict participation to specific financial institutions.
Aksakov underscored that cryptocurrency will be exclusively employed for international trade instead of domestic payments and that the process will be rigorously regulated to protect economic integrity.
He also observed that Russian companies already utilize crypto for trade, with transactions totaling billions of dollars.
