Russia is contemplating the legalization of cryptocurrency for international payments as the country faces sustained financial pressure from Western sanctions.

The State Duma, the lower house of the Russian Parliament, will review a law on Tuesday that permits international payments via cryptocurrencies, according to Elvira Nabiullina, the governor of Russia’s central bank.

“Today, the State Duma is considering a law that allows settlements in cryptocurrencies within the framework of an experimental regime,” Nabiullina said, addressing the Russian Federation Council, the upper house of Parliament, as reported by state-owned news agency RIA Novosti.

The Duma is anticipated to approve the law on Tuesday, Reuters reported.

Russia’s central bank is also planning to use cryptocurrency for cross-border transactions. Nabiullina stated that crypto-based payments are expected to commence before the end of 2024. “We are already discussing the terms of the experiment with ministries and departments, with businesses, and we expect that the first such payments will take place before the end of this year,” she said.

The Russian Embassy in London did not immediately respond to CNBC’s request for comment on the country’s pro-crypto legislation plans.

This move marks a significant shift in the central bank’s stance on cryptocurrency. In January 2022, the central bank proposed banning the use of crypto for transactions and the mining of digital currencies, citing threats to financial stability, citizens’ well-being, and monetary policy sovereignty.

This development comes amid increasing tensions between Russia and the U.S. and its allies, leading to numerous sanctions on Russian individuals and entities in response to Russia’s invasion of Ukraine in February 2022. The U.S., European Union, and Britain have continued to intensify pressure on Russia, targeting President Vladimir Putin, the financial sector, and various oligarchs.

In addition to cryptocurrency, Russia is exploring the implementation of a digital version of the ruble. Unlike cryptocurrencies such as bitcoin, central bank digital currencies (CBDCs) are issued directly by governments and are designed to replicate fiat currencies in digital form.

Nabiullina stated that the central bank plans to transition from a pilot phase to mass implementation of the digital ruble starting in July 2025, according to Russian news agency Interfax.

The use of cryptocurrencies to evade sanctions has been attempted by other sanctioned countries. North Korea, for instance, has been accused of raising millions of dollars in crypto to fund state programs and circumvent foreign sanctions. The North Korean state-backed hacking group Lazarus was implicated in a major heist on the Ronin Network, a blockchain supporting the popular NFT game Axie Infinity, with cybercriminals stealing over $600 million worth of digital tokens, according to blockchain analysis firms Elliptic and Chainalysis.

Proponents of cryptocurrencies argue that digital assets are effective tools for countering illicit activities, as the underlying blockchain networks are public, secure, and immutable.

(Adapted from Reuters.com)