Russia is set to introduce two new cryptocurrency exchanges, one in Moscow and another in St. Petersburg. This initiative aims to enhance the country’s foreign economic activity (FEA) and offer a new platform for digital transactions, according to local media Kommersant. 

The proposed exchanges will initially operate in a “test mode,” primarily involving a limited number of users, according to Mikhail Uspensky, a member of the State Duma's legislative regulation committee for cryptocurrencies. 

Once fully operational, the exchanges are expected to cater primarily to large exporters and importers. Uspensky indicated that small and medium-sized businesses, and individuals, might face restricted access initially.

Focus on Stablecoins and BRICS Currency

A significant aspect of this initiative is the focus on developing stablecoins tied to the Chinese yuan and the BRICS currency basket. 

The stablecoins will reportedly play a crucial role in facilitating financial transactions, particularly with Chinese counterparts. Russia's move aligns with its overall strategy to avoid international sanctions and tighten compliance measures.

The Bank of Russia has been exploring stablecoin legalization for cross-border transactions. Oleg Ogienko from BitRiver emphasized that, according to Russian legislation, stablecoins are considered digital financial assets. 

This development underscores Russia’s intent to strengthen economic cooperation within the BRICS bloc, which includes Brazil, Russia, India, China, and South Africa.

The BRICS bloc has been advocating for a digital currency since the 11th BRICS Summit in 2019, with the goal of promoting alternative financial systems. However, creating a unified currency faces significant challenges, including disagreements among member states on its implementation.

Risks and Regulatory Concerns

Despite the optimistic outlook, the project faces several challenges. Uspensky highlighted potential risks, such as the possibility of transaction details being exposed and ending up on sanctions lists. Such exposure could lead to blocking transactions involving crypto assets purchased on these new exchanges.

The regulatory environment in Russia is evolving. The country currently operates under Federal Law No. 259, which regulates digital financial assets. However, this law does not specifically address cryptocurrency exchanges. 

Regulatory Landscape and BRICS Collaboration.

In addition to the new exchanges, recent legislation in Russia aims to support the growth of the crypto industry. Russian President Vladimir Putin recently approved a law to reduce reliance on the US dollar, set to take effect in November 2024. 

This legislation includes provisions for the registration of mining firms and introduces new regulatory frameworks for the sector. The law also bans mass cryptocurrency advertising within Russia, reflecting a more cautious approach to digital asset promotion.