Russia has officially endorsed a law allowing the utilization of digital financial assets (DFAs) for cross-border payments as a strategic move to evade sanctions backed by Western powers.
President Vladimir Putin has signed the bill into law, permitting the use of digital currencies for international trade transactions, resolving months of legislative debate. However, the law specifies that only tokenized assets issued by the Bank of Russia are sanctioned for use in foreign trade payments.
Despite granting approval for DFAs, the law expressly prohibits their domestic use within Russia, aimed at safeguarding the primacy of the ruble in local transactions while leveraging DFAs to bypass economic sanctions.
This legislative change has significant implications for Russia’s anti-money laundering (AML) laws, as it exempts the disclosure requirement for parties involved in DFA transactions due to existing sanctions risks.
Moreover, the law enables the transfer of non-state pensions and insurance contracts through digital platforms. While the central bank has the authority to introduce additional conditions for DFA settlements, it is unlikely to expand such conditions for domestic use.
Anatoly Aksakov, head of the Duma Financial Committee, highlighted that employing digital assets in foreign trade operations could enhance collaboration with friendly nations and alleviate the pressure of sanctions.
However, the implementation of the law may face challenges, particularly in onboarding international partners to DFA platforms. Additionally, the relaxation of AML rules raises concerns about potential exploitation by malicious actors for financial crimes.
Despite these hurdles, Russia is pursuing alternative strategies, including the development of a digital ruble with cross-border functionalities and exploring retail central bank digital currencies (CBDCs) for international payments, with collaborations established with China and other allies.
While previous plans to utilize stablecoins for international settlement encountered obstacles, Russia is now focusing on a blockchain-based payment system for BRICS member states, aiming to reduce the dominance of the U.S. dollar in global trade and mitigate the impact of economic sanctions.