Russia legalizes Bitcoin and cryptocurrency mining

Russian President Vladimir Putin approved legislation on Aug. 8 to legalize Bitcoin (BTC) and cryptocurrency mining. The country is attempting to reduce its reliance on the United States dollar in international trade.

The law will take effect in November 2024 and allow approved mining firms to register through a state database to mine crypto. Small, individual miners can also mine digital currency without officially registering if their energy consumption remains below a certain threshold.

Oversight of the newly legalized mining industry will be split between the Bank of Russia, the Ministry of Finance, and a select cabinet of ministers within the Russian government, who will establish more precise regulatory requirements over the coming months. The bill also introduced a ban on mass cryptocurrency advertising inside Russia.

BRICS and de-dollarization efforts

BRICS, which stands for Brazil, Russia, India, China, and South Africa, is a growing collection of emerging economies that is increasingly seeking to diminish reliance on the US dollar for international trade.

The BRICS bloc first introduced the idea of an alternative digital currency at the 11th Annual BRICS Summit in 2019, a proposal that has garnered widespread attention yet faces significant hurdles, including disagreements between leading member states on how a unified currency would work.

In 2023, Russia renewed its focus on developing a unified BRICS currency, with State Duma Deputy Chairman Alexander Babakov reportedly claiming that the leading members of the emerging economic bloc were working on developing a new currency for international trade settlement.

Shortly after Babakov made his statements, the Bank of Russia and the Russian government announced plans to set up special entities to use digital assets as a method of cross-border settlement.

Criticisms of the BRICS ambitions

Macroeconomist Lyn Alden expressed doubt that a unified BRICS currency backed by gold would dethrone the US dollar.

In a statement to Cointelegraph, the economist pointed to the age-old problem with gold-backed paper currencies tending to issue far more paper, or claims on the underlying gold, relative to the actual supply of gold held in reserves. This could lead to monetary debasement and, eventually, the collapse of the currency.