Putin Signs Law to Reduce Dollar Dependency and Legalize Crypto Mining in Russia

Putin Signs Law to Reduce Dollar Dependency and Legalize Crypto Mining in Russia

Russian President Vladimir Putin has signed a new law aimed at reducing Russia’s dependence on the U.S. dollar in global trade. This legislation, set to take effect in November 2024, will permit registered mining companies to engage in cryptocurrency mining through a state-administered database. While larger operations will need to register, individual miners can mine digital currencies without official registration, provided their energy usage stays below a specified limit.

The regulation of this newly legalized industry will be overseen by a coalition of the Bank of Russia, the Ministry of Finance, and a select group of government ministers. This group will develop more detailed regulatory guidelines in the coming months. Additionally, the new law imposes a ban on mass cryptocurrency advertising within Russia.

BRICS and the De-Dollarization Initiative

The BRICS nations—Brazil, Russia, India, China, and South Africa—are a coalition of emerging economies that have increasingly pursued strategies to lessen their reliance on the U.S. dollar for international trade.

The concept of an alternative digital currency was first proposed by BRICS at the 11th annual BRICS Summit in 2019. Although this proposal has gained considerable attention, it faces significant challenges, such as disagreements among key member states on how a unified currency would function.

In 2023, Russia renewed its focus on developing a unified BRICS currency. State Duma Deputy Chairman Alexander Babakov indicated that the leading BRICS nations were actively working on creating a new currency for international trade settlements.

Following Babakov’s remarks, both the Bank of Russia and the Russian government announced plans to establish special entities designed to use digital assets for cross-border transactions.

Skepticism Towards BRICS Currency Plans

Macroeconomist Lyn Alden has raised concerns about the viability of a gold-backed BRICS currency to supplant the U.S. dollar. Speaking to Cointelegraph, Alden highlighted the historical problem of gold-backed paper currencies, which often results in an over-issuance of paper claims relative to the actual gold reserves. This imbalance could lead to currency debasement and, eventually, the collapse of the currency itself.