Russian banks expand digital services to counter sanctions
Email Elise Hansen
” href=”https://www.law360.com/banking/articles/1475515/#”>Elise Hansen Law360 (March 18, 2022, 8:59 p.m. EDT) — Russia’s third-largest bank on Friday unveiled plans for a payment wallet to facilitate online purchases as the country’s banks scramble to scale up digital services after being cut off from many Western fintechs.
Gazprombank, Russia’s third-largest bank by assets, said its new GazpromPay wallet will allow users to quickly and securely make payments from their bank cards to online stores. The wallet, which is set to debut on March 22, will be available on smartphones and other devices, according to the announcement.
Sanctions imposed on many major Russian banks have left consumers with cards from these banks unable to use them for many online purchases, nor can they be used with services such as Apple Pay and Google Pay. , the Russian central bank noted in an announcement in late February.
The United States imposed a range of penalties on Russian financial institutions following Russia’s invasion of Ukraine and the closure of the European Union seven major Russian banks outside the SWIFT messaging system that facilitates global financial transactions.
Gazprombank touted its service as a way for consumers to navigate “Russia’s dynamically developing retail financial system”.
The wallet is part of Gazprombank’s ongoing digitization efforts, Vice President Dmitry Zauers said in a statement, while acknowledging that “the need to invest in the development of such services in Russia has acquired today special importance”.
Additionally, Russia’s largest lender, Sberbank PJSC, said on Thursday it had received a license from Russia’s central bank to issue and trade digital assets. The public bank is sanctioned by the United States and the EU
The digital asset platform, which is expected to go live in about a month, will allow companies to buy tokens or issue their own assets, among other transactions, according to the Sberbank statement.
Allowing businesses to issue digital assets can help them attract investment, while acquiring other assets will “position them to invest their currently idle funds to generate revenue,” the announcement says.
Russia is working on developing its own central bank digital currency, the digital ruble, but the license marks a turning point in the Bank of Russia’s stance on cryptocurrencies.
Just two months ago, the bank argued for a ban on cryptocurrency trading, mining and use, though it did not suggest banning ownership by individuals. At the time, the bank claimed that cryptocurrencies could undermine the national economy and facilitate illegal activities.
“We are just beginning our work with digital assets, realizing that further development requires adaptation of the current regulatory framework,” Sberbank’s Commercial Transactions Division Director Sergey Popov said in a statement on Thursday. “To do this, we are ready to work closely with the regulatory and executive bodies.”
Some legislators have expressed concerns that cryptocurrencies can also be used to help blacklisted Russian entities or individuals evade US sanctions. U.S. Sen. Elizabeth Warren, D-Mass., on Thursday introduced a bill to bolster the Biden administration’s sanctions authority in the cryptocurrency space.
The bill faces opposition from industry and some Republicans, who argue that using cryptocurrency to evade sanctions on this scale would be impractical, particularly because enforcement capabilities of the law in space have increased dramatically in recent years.
— Additional reporting by Najiyya Budaly. Editing by Lakshna Mehta.
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