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Russia’s relationship with crypto has been a rollercoaster ride, especially throughout 2022. The country’s leaders have been clashing over the issue of digital currency for some time now. Some have remained firm in their assertions that crypto is no good, while others are convinced that it is a powerful asset. President Vladimir Putin has wavered back and forth on the issue in recent months. Today, however, marks a final decision on the debate, as Russia bans crypto payments.
The crypto conversation in Russia has been rich this year. In January, government officials began to seriously weigh the value and risks present in the industry. Discussions about the usefulness of a state stablecoin, crypto mining, crypto as payments and more have started to take off. This in turn led to an agreement among officials to create a crypto regulatory roadmap.
Adding to the conversation in a major way is the country’s decision to invade neighboring Ukraine. While the latter fought more battles against military might than expected, Russia likely exploited more manpower and resources than it needed. The country has also been economically affected, if only temporarily, by ongoing US and EU sanctions.
Some in the country see crypto as a way to achieve economic prosperity. Using Russia’s vast reserves of non-renewable energy for crypto mining can and has led to profitable production, for example. Just last month, the country struck deals with private Russian crypto-mining companies to supply power for mining. Although Putin supported crypto for these same reasons, he signs a bill that seems like a big step backwards.
Russia bans crypto payments and criticizes stablecoins
Putin is getting bullish on the crypto mining industry. One might therefore expect the Russian leader to soften his stance on other aspects of crypto. However, as Russia bans crypto payments, it seems unlikely that the country will ever embrace the home use market.
Earlier today, Putin signed into law a bill banning the use of cryptocurrency as a form of payment. According to reports, the draft law establishes “the ban on the introduction of other currency units or currency substitutes into the territory of the Russian Federation.”
This wording also negates the potential for a Russian stablecoin, thus killing two huge potential areas for crypto expansion in the country at once.
The Bank of Russia certainly has no qualms about this implicit prohibition. This week, representatives said stablecoins were high risk and not so stable. They say that since the underlying assets do not belong to the stablecoin holder, “repayment at the nominal price of the collateral assets is not guaranteed, and the price of a stablecoin is not actually stable.”
Putin’s decision to sign the bill might be a little confusing to some. Indeed, Russia still embraces crypto mining with open arms. The Bank of Russia is support the legalization of mining activities. However, he wants to force miners to sell their assets overseas using fiat currencies other than the ruble. Governor Elvira Nabiullina’s comments that activity should not “penetrate” the Russian financial system. It seems that this activity is only welcome because it does not put any Russians at risk with its volatility.
As of the date of publication, Brenden Rearick had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.