Russia's crypto circuit is being built for cross-border settlements, but sanctions pressure is gradually narrowing the opportunities for going abroad. This paradox calls into question the economic feasibility of the entire structure.
Creating a regulated crypto circuit in Russia is not so much a technological task as it is a political and economic one. Market participants and state regulators pursue different goals but agree on one thing: the de facto existing digital asset industry must be legalized and brought out of the shadows. However, sanctions risks, especially within the framework of the 20th EU sanctions package, could significantly change the rules of the game.
For whom is the crypto circuit being created?
The crypto circuit is not a single product but an ecosystem for different categories of users. For foreign trade companies, this is a natural extension of the experimental legal regime (ELR) to a wide range of participants. For investment divisions, it means expanding the range of digital products, including opportunities for digital financial assets (DFAs), attracting international investors, and creating secondary turnover. For banks, it offers the chance to expand lending, including long-term, short-term, factoring, and debt securitization.
The state, represented by the Central Bank, the Ministry of Finance, and the Federal Tax Service, is interested in bringing the industry into a regulated, taxable field and solving problems related to AML/CFT and FATF requirements. For each category—both legal entities and individuals—there will be tools and services that are currently lacking.
Sanctions and the resilience of the circuit
Circumventing sanctions is not the primary goal of the crypto circuit, but pressure on it is already being applied. Market participants are aware of the risks and are taking measures to mitigate them. Fears that infrastructure elements could fall under secondary sanctions are not shared by all experts. The system is capable of functioning, much like fiat operations do.
Three key approaches are used to reduce sanctions risk:
- Interaction with licensed solutions and intermediate links in the payment chain. This helps blur the trail and reduce the load on direct channels.
- Managing the issuance of stablecoins based on banks. It is technically impossible to track and block the entire issuance system entirely: it can be easily duplicated, launched from scratch, and scaled within Russia.
- Using alternatives: DFAs, investment products, and tokenization become a backup option for the most severe scenarios.
Does a closed circuit make sense?
The value of cryptocurrency lies in its cross-border nature. If the circuit is completely closed within Russia, its economic meaning will significantly diminish. However, complete isolation is impossible due to the decentralized nature of digital currencies. Attempts to restrict entry and exit into fiat outside Russia will not fully close the circuit: not all countries support the policy of isolating Russia, and the DeFi sector is so developed that it is technically impossible to erect all barriers without destroying the corresponding tools.
The economic meaning of Russia's crypto circuit is to give the market the opportunity to bypass fiat restrictions using cryptocurrency and profit from it.
Who wins and who loses?
In the long term, only the black market will lose. It will not disappear entirely, but the financial flow through completely unregulated organizations will gradually decrease. All other participants will only benefit.
Russian banks are already deploying their own infrastructure and know how to work with crypto instruments, so they come out ahead. Small and medium capital, as well as startups, lose out. They have three paths:
- Migration to other countries.
- Selling to banks in the near future.
- Creating products that banks currently lack time for but that are needed by the market and specific client banks.
Who are crypto depositories being built for?
Banks are creating crypto depositories and crypto wallets for their clients—this is a legal requirement. The use of cryptocurrency has long moved beyond a narrow circle of anonymous users: buying a car or real estate with crypto, transferring funds abroad require proof of the legal origin of funds and readiness to answer questions about taxes. This is precisely the function of depositories and regulated wallets—helping users within the legal framework.
Excesses on the part of market participants and the state are inevitable, not so much due to malicious intent as due to incompetence: new products are complex at the technical and user levels, and it will take years of upskilling for all participants.
Analyst's opinion: Regulation will inevitably change the market, giving the "green light" only to institutional players with large client bases. This is about a new segment of users of crypto depositories and crypto wallets—these are existing traditional players, bank clients, individuals, and legal entities who will receive the same service at their preferred bank.