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Russia Abandons State-Owned Crypto Exchange Project in Favor of Private Platforms

by BSC News

May 29, 2023

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The shift in strategy aims to facilitate cross-border settlements and mitigate financial sanctions imposed on Russia.

Boosting Cross-Border Transactions

In a surprising turn of events, Russian lawmakers have announced their decision to halt the development of a state-level cryptocurrency trading platform, according to a report by local newspaper Izvestia. The move comes as a reversal of the government's previously announced project, which aimed to bolster tax revenue by creating a state-owned crypto exchange

Instead, the lawmakers are now focused on establishing a regulatory framework enabling private companies to launch their crypto trading platforms, monitored by Russia's central bank. The Ministry of Finance opposed the idea of a state-level cryptocurrency exchange. Instead, the ministry argued that comprehensive regulation of such assets should take priority. Consequently, the government has shifted its stance, opting to support the creation of private crypto exchanges to facilitate cross-border settlements and mitigate some of the financial sanctions imposed by the West following Russia's involvement in the Ukrainian conflict. 

Anatoly Aksakov, the head of the State Duma's Committee on Financial Markets, stated that the priority now is to regulate the process of establishing new crypto platforms and organizations. He confirmed that rules governing these exchanges would be established by the end of 2023 and outlined in a forthcoming draft law. 

Aksakov also emphasized that Russia will continue to explore and develop additional crypto platforms as a response to the imposed restrictions. The State Duma Committee Head added that the private crypto exchanges would enable Russian businesses to engage in cross-border transactions, which could help them avoid sanctions.

Russian Central Bank to Oversee the Private Exchanges

The regulatory oversight of these private crypto exchanges is expected to fall under the purview of the Russian central bank, according to Aksakov. The associated regulatory framework will be included in the bill on experimental legal regimes.

Bank of Russia's deputy governor, Alexey Guznov, cautioned against labeling these platforms as traditional cryptocurrency exchanges. He suggested that they would likely function as organizations facilitating interaction between exporters and importers to facilitate cross-border transactions. These organizations could assist Russian companies in making payments for parallel imports, among other services.

Ivan Chebeskov, the director of financial policy at the Ministry, explained that the preference was to regulate businesses operating these exchanges and digital assets. The Ministry reached a compromise with the central bank, bringing crypto mining activities under regulation and permitting crypto use in international payments.

The focus on private crypto exchanges marks a significant shift in the country's approach to digital assets and their potential role in boosting economic activity and circumventing sanctions.

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