Russia Legalizes Crypto Mining As BRICS Continues To Gain Momentum

Russian President Vladimir Putin has sanctioned legislation aimed at reducing dependence on the US dollar in international trade. Set to take effect in November 2024, the law will permit authorized mining companies to register through a state database to engage in cryptocurrency mining. Additionally, small-scale individual miners can mine digital currencies without formal registration, provided their energy usage stays below a specified limit.

Decreasing Dependence On The Dollar

Oversight of the newly regulated mining sector will be divided among the Bank of Russia, the Ministry of Finance, and a designated group of ministers who will define more specific regulatory measures in the coming months. The legislation also includes a prohibition on widespread cryptocurrency advertising within Russia.

The BRICS group, namely Brazil, Russia, India, China, and South Africa, consists of emerging economies increasingly looking to reduce their reliance on the US dollar for international transactions.

At the 11th BRICS Summit in 2019, the bloc initially proposed an alternative digital currency. Although this proposal has gained significant attention, it faces considerable challenges, including disagreements among major member countries about how a unified currency would function.

Skepticism Remain

In 2023, Russia renewed its focus on creating a unified BRICS currency. State Duma Deputy Chairman Alexander Babakov reportedly mentioned that key BRICS members were working on a new currency for international trade settlements. The Bank of Russia and the Russian government also announced plans to establish special entities to facilitate cross-border transactions using digital assets.

Macroeconomist Lyn Alden has expressed skepticism about a gold-backed BRICS currency replacing the US dollar. Alden highlighted the historical issue of gold-backed currencies issuing more paper claims than the actual gold reserves, which could lead to monetary devaluation and potential currency collapse.