Russia Begins Use of Cryptocurrencies in International Trade
Russia has begun making trades in cryptocurrencies, with trades beginning on a trial basis in Switzerland and an trade deal with Venezuela for Russian auto component parts being settled in Venezuela’s own national cryptocurrency, the Petro.
Russia’s Gazprombank, the third largest bank in the country, is planning to execute its first test deals with cryptocurrencies later this year via its subsidiary in Switzerland. According to deputy chief executive Alexander Sobol, the bank doesn’t currently have plans for massive introduction of the feature, but is looking into it due to existing demand from some of its major clients. “It’s going to be test deals. Not major ones, just for ourselves. Some of our major clients are interested in such services, so we are currently looking into the possibilities of how to organize it,” Sobol said.
Cryptocurrency deals are not currently regulated by Russian law, with relevant legislation in the process of being developed. According to the bank’s representative, Switzerland was chosen for its “liberal” laws on cryptocurrencies.
The Venezuela deal involves Venezuela using its “Petro” cryptocurrency, paying Russia for the delivered automotive parts and components, Jose Vielma Mora, the Venezuelan minister of foreign trade, said on Monday. The Venezuelan Foreign Ministry said that the use of Petro in international transactions was on the agenda of the recent Russian-Venezuelan high-level intergovernmental commission. According to Mora, the Venezuelan side has also cooperated with Russia’s KAMAZ company, best known for its trucks.
“The areas of Russian-Venezuelan cooperation include the purchases of automotive parts and components, of tires and batteries, as well as assembling of these vehicles in our country and the forms of payment, in which we include the payments with the use of Petro,” the minister said.
Venezuela has become the first country to launch the oil-backed cryptocurrency. Sales of Petro started in March after a month of pre-sales. On February 21 this year, Venezuelan President Nicolas Maduro said the Petro raised US$735 million in the first day of its pre-sale.
Maduro plans to create four economic zones for working with Petro. The shift to Petro in public procurement, and sales of property for the cryptocurrency are among other plans. Also in February, Maduro said that Venezuela was preparing to launch another cryptocurrency backed by gold and other precious metals.
“The Russian moves are interesting as the State Duma has yet to decide on cryptocurrency legislation while President Putin has already urged caution,” says Chris Devonshire-Ellis of Dezan Shira & Associates. “The Government will be looking at these transactions very carefully from a technological and sustainability perspective. Both Russia and Venezuela are politically close so problems can be ironed out between them. Essentially, they are using the actual markets themselves as test cases to see how they work. It’s a good way to identify issues and start to understand where transactional legislation is needed. Russia may well become the leader in this field as countries shy away from using the US dollar and want alternatives.”
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