In About-Face, Russia’s Central Bank Issues Crypto Licenses

On March 17, Russia’s Sberbank announced it had received a license from the Bank of Russia to run a cryptocurrency exchange and even launch its own token.

The country’s largest retail bank is struggling under the sanctions that have cripple the country’s financial sector and economy generally.

Which almost certainly why it received the central bank’s nod just one month after the central bank’s governor, Elvira Nabiullina, was ignoring President Vladimir Putin’s instructions to work with the Finance Ministry as it sought to legalize cryptocurrency by creating a formal regulatory framework.

Yet on Feb. 17, all that she managed to agree to in talks with Finance Minister Anton Siluanov and Deputy Prime Minister Dmitry Grigorenko was to formally state their cases — despite Putin’s public call a compromise.

Since then, the much-tougher-than-expected sanctions imposed following Russia’s invasion of Ukraine have changed things in two notable ways: First, Sberbank and all other major, oligarch-connected banks were evicted from the SWIFT network and cut off by major credit card companies and other payment firms like PayPal.

Second, the bottom dropped out from under the Bank of Russia’s argument that crypto should be banned because it presented a threat to the country’s financial stability.

Suddenly, Sberbank and others were cut off from the world, only able to complete transactions internally and with a few countries not participating in sanctions — making crypto a much more desirable option.

Big and Little

The move can only raise speculation about whether Russia’s financial institutions and the sanctioned oligarchs that control them will turn to crypto both to protect assets and to get companies banned from doing business them to sell goods and services to them unknowingly — or at least with plausible deniability.

Sen. Elizabeth Warren (D-Mass.) led that charge during the U.S. Senate Banking Committee hearing on digital assets on March 17.

Read more: Use in Ukraine Lends Some Luster to Crypto’s Dark Side in Senate Hearing

Warning that oligarchs “may attempt to use crypto and anonymizing tools to evade U.S. sanctions and protect their assets around the globe,” she announced a new piece of legislation, the Digital Asset Sanctions Compliance Enhancement Act, that takes a very broad approach to crypto sanctions — notably in a very broad definition of “digital asset transaction facilitators” that ranges from crypto exchanges to open-source software code.

See also: PYMNTS Crypto Crime Series: When Privacy Counts, Crypto Users Turn to Mixing Services

It’s worth noting that in that in the hearing all the witnesses agreed that crypto probably wasn’t a good vehicle for oligarchs seeking to move billions out of Russia secretly, largely because transactions on that scale would be too obvious.

That’s something the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) more or less agreed with last week, saying using crypto to evade sanctions on a large scale was “not necessarily practicable.”

However, it said that in a statement warning financial institutions to be vigilant in looking for such attempts.

Read also: Use in Ukraine Lends Some Luster to Crypto’s Dark Side in Senate Hearing

But it would certainly be possible for smaller customers to use crypto to evade sanctions and trade rubles that are plummeting in value for cryptocurrencies that could protect their savings.

Stablecoins in particular would essentially be like buying dollars — most maintain a peg to the dollar by holding one-to-one baskets of fiat or other liquid financial instruments.