In a statement released on October 6, 2022, regulators in the European Union introduced a set of sanctions against Russia due to its conflict with Ukraine. The European Union banned all previously-limited transactions between Russian bitcoin wallets and E.U. service providers. It comes amid the bloc’s eight sanctions against Russia, and the package includes a series of “biting measures” intended to reinforce pressure on the Russian government and economy. The E.U. sanctions also plan to deal a blow to Russia’s plan to allow any industry to accept Bitcoin and Cryptocurrency for international trade.
Sanctions imposed in response to Russia’s annexation of Ukraine’s territory as a result of what the E.U. calls a “sham” referenda organized in the regions that Russia occupied are an illegal attempt to grab land and change international borders by force. This all goes along with troop mobilization and threats of nuclear escalation. Sanctions include a complete ban on cross-border crypto payments between Russia and the E.U.; it also means the prohibition of all crypto-asset wallets, accounts, or custody services, irrespective of the amount in the wallet. The previous sanctions capped crypto payments from Russia to E.U. wallet transactions at €10,000.
However, with this new sanction, all Bitcoin and cryptocurrency wallets are banned in regions that align with E.U. The aim is to further limit the Kremlin’s power. High Representative for Foreign Affairs and Security Policy Joseph Borrell said that “this new sanctions package against Russia is proof of our determination to stop Putin’s war machine and respond to his latest escalation with fake ‘referenda’ and illegal annexation of Ukraine territories.” He added: “We are further hitting Russia’s war economy, limiting Russia’s import and export capacities, and are on the fast track to liberate ourselves from Russian energy dependence.” This move comes after there have been nuclear threats.
The E.U. also announced that it would be targeting those responsible for the illegal annexation of Ukraine territories and boldly stated that the E.U. stands by Ukraine for as long as it takes. It will further extend its import ban on steel production that originates in Russia or is exported from Russia, among other hefty import bans.
What led to the ban by the E.U.?
The ban comes after the legalization of cross-border crypto payments by the Central Bank of Russia, where its ministry of Finance announced the country’s intention to allow any industry to accept Bitcoin and cryptocurrency for international trade. In the agreement, Russian officials approved crypto usage for cross-border payments. The policy approved such transactions and described how to acquire cryptocurrency, what can be done with it, and its uses in cross-border settlements. Deputy Minister of Finance Alexei Moiseev said that “the Ministry of Finance and the Central Bank as a whole agreed on a bill that allows cross-border settlements in cryptocurrency.” Moiseev continued to say that “there is no way to do this without cross-border settlements in cryptocurrency.”
According to reports by Bitcode Method officials, Russia aims to use a central bank digital currency with China, which is currently in a pilot phase, for transaction settlements. Previously, the President of Russia, Vladimir Putin, had signed a bill into law prohibiting digital financial assets as payment. According to local reports, Eurasia Bank and Intebix in Kazakhstan announced that they jointly completed the bank’s first regulated crypto purchase for its fiat. This news came after thousands of Russians entered Kazakhstan, just a week after Putin announced a partial mobilization of reservists to fight Ukraine.
E.U. grew increasingly concerned about Russians turning to crypto to access their money. After restricting Russian payments to European crypto wallets to €10,000 in April, the European Union reportedly banned Russian nationals and entities from holding any assets in E.U. crypto wallets. The recent ban not only sanctioned cryptocurrency exchanges but extended beyond restrictions on individuals and entities in the Donetsk, Luhansk, Kherson, and Zaporizhzhia regions. Furthermore, export sanctions aimed at the Russian military, industrial and technological access, and its defense sector were introduced. The E.U. has imposed a €7 billion import restriction and oil price caps.
As previously reported, Russia mainly relies on foreign crypto infrastructure to conduct cryptocurrency operations. Ivan Chebeskov, director of the financial policy department of Russia’s Ministry of Finance, announced that the government plans to allow international settlements in digital assets for digital assets in all industries without restriction. The Bank of Russia previously reported that it plans to start testing the digital ruble with members of the public in April 2023. If that goes well, it intends to allow the creation of wallets for non-residents and exchanges between the digital ruble and foreign currencies in 2024.
Cross-border payments are a key priority in global finance for universal reach and securing settlement. It allows for payment to be immediate and affordable, which is what Russia needs now, but the cross-border crypto payments ban makes the whole plan disappear. Russia has yet to respond to the ban, but it’s crucial to stay updated on these movements as they progress, especially if it’s possible that you will be affected.