Is Russia looking to try out crypto payments in island getaways?

Could Russia be starting to use cryptocurrency for payments? A Russian senator has suggested a new plan that would allow companies on two special islands to use crypto for business.

The plan focuses on Russky Island in the Far East and Oktyabrsky Island in the European exclave of Kaliningrad. These aren’t just any islands; they are designated “special administrative regions” (SARs), which essentially means they operate under more flexible tax and currency rules. The idea is that allowing crypto transactions here wouldn’t step on the toes of Russia’s central bank, which has firmly banned crypto payments within the country’s main jurisdiction.

The proposal was put forward by Alexander Shenderyuk-Zhidkov, a high-ranking senator. He explained that the companies registered in these SARs aren’t technically considered Russian residents when it comes to currency regulations. This clever distinction could create a legal pathway for them to use cryptocurrencies for settlements, something currently forbidden for mainland businesses that must use the Russian ruble.

Right now, Russia’s stance on crypto is complicated. While you can own it as property, you can’t use it to buy things. The Central Bank of Russia (CBR) has only permitted its use for international trade under a strictly controlled “experimental legal regime” (ELR), a mechanism many believe helps bypass Western financial sanctions.

However, Senator Zhidkov feels this process is moving too slowly. “I would not like it if we spent six years getting the law right,” he stated, arguing that the point of an “experimental” regime is to actually experiment. He believes the rules of this experiment could be extended to the two island SARs to speed things up.

There’s another angle to his proposal: bringing money back home. Shenderyuk-Zhidkov thinks that creating these crypto-friendly zones could attract “foreign companies with Russian roots,” encouraging them to bring their capital back into the country. These special regions are already popular; by the end of 2024, nearly 500 companies, including the tech giant Yandex, had registered there.

So, what do the experts think? Most agree it’s a sound idea in principle. Mikhail Uspensky, a crypto regulation expert, believes it would be a positive move for Russia’s market but warns that it would likely face a long and winding road to get official approval.

Maria Agranovskaya, a law firm partner, echoed that sentiment. “The idea itself is sound, but we need to think deeply about how to do it correctly without breaking the law,” she commented, adding, “The opinion of the Bank of Russia is important.”

Interestingly, this isn’t the first time this idea has surfaced. Back in 2018, the Ministry of Finance suggested using these same islands for crypto trading. While that plan never materialized, this new proposal shows that the idea of creating crypto sandboxes in Russia’s special economic zones is still very much alive.