Russia bets on stablecoin payments, rejects cryptocurrency as legal tender

The Russian government is considering legalizing stablecoin payments while banning the use of cryptocurrencies for the same purpose.

The fiat-pegged coins are closer to Moscow’s idea of digital currency, and the transactions made with them may be regulated under a separate law after the adoption of a crypto-focused framework.

Russia’s finance ministry favors legalizing stablecoin payments

The Russian Ministry of Finance (Minfin) is now inclined to treat cryptocurrencies, stablecoins and digital financial assets as distinct categories, a high-ranking representative unveiled.

The ministry is convinced that tokens pegged to national fiat currencies are the closest to a regular means of payment, the official indicated.

Stablecoins should be regulated separately from other cryptocurrencies, according to Alexey Yakovlev, director of its Financial Policy Department.

Once Russia’s upcoming legislation for crypto assets comes into force, the authorities in Moscow will be able to move forward and create special regulations for stablecoins, Yakovlev said.

That will include establishing a different oversight regime as well, the Minfin executive added, quoted by the Russian crypto news outlets Bits.media and RBC Crypto.

The finance ministry will continue to discuss stablecoins with the Central Bank of Russia (CBR) and market participants, but the current “consensus is that they are closer to digital currency,” he noted.

Speaking at a conference devoted to tokenization, organized by the “Banking Review” magazine, Yakovlev elaborated:

Answering questions from reporters on the sidelines of the forum, he remarked this would “probably” mean adopting a dedicated stablecoin law, after assessing whether this will best serve Russian economic interests.

Russia prepares for comprehensive crypto regulation

Yakovlev’s statements come against the backdrop of advancing preparations to adopt a comprehensive framework to regulate operations and transactions with cryptocurrencies in Russia.

The Minfin and the CBR have already drafted a bill outlining the future architecture of the Russian crypto market, which will rely on channeling cryptocurrency transactions mainly through existing financial institutions such as banks, stock exchanges and brokers.

These will be allowed to work with decentralized digital money under their existing licenses, while dedicated crypto platforms will be required to meet a set of stringent standards to obtain authorization. Foreign crypto service providers will need a Russian office to continue to operate legally.

The legislation is based on a new regulatory concept published by the Bank of Russia in late December. At the time, the authority announced that cryptocurrencies and stablecoins would be recognized as “monetary assets,” as reported by Cryptopolitan.

The current Russian law “On Digital Financial Assets” (DFAs), which went into force in 2021, mostly covers tokenized real-world assets and securities. It describes “digital currency” as “a set of electronic data … that is offered and/or may be accepted as a means of payment.”

However, as of now, this definition refers mostly to central bank digital currencies (CBDCs), such as the digital ruble, and does not encompass cryptocurrencies like Bitcoin (BTC). The use of the latter for payments is likely to remain strictly prohibited, as officials have already indicated.

At the same time, Russia has been actively using stablecoins to circumvent financial restrictions imposed over its invasion of neighboring Ukraine.

And since Russian assets and flows in tokens like Tether (USDT) are being successfully blocked, a ruble-pegged stablecoin called A7A5 has been gaining traction despite targeted sanctions.

Meanwhile, the Financial Action Task Force (FATF) concluded in a recent report that stablecoins have become a preferred method for illegal schemes, cybercrimes, and proliferation.

Citing data from U.S. blockchain analytics firm Chainalysis, the organization fighting money laundering highlighted that they accounted for 84% of the total volume of illicit virtual-asset transactions last year.