Limitations Imposed by the Central Bank of Belarus Could Drive Users to Cryptocurrency

Belarus Central Bank is imposing new restrictions on foreign currency transactions in response to EU sanctions. Such a move could create complications for citizens and push them to seek alternatives such as cryptocurrencies.

Fight against the regime

The Belarusian regime has been accused of serious human rights violations, harassment and unlawful detention of journalists, suppression of political opposition, repression of civil society, and more. All these escalations arose in August 2020 after the fraud in the presidential elections in Belarus.

To express its outrage at such actions, the EU imposed harsh sanctions on the Belarusian economy, and since then the country has been struggling to recover. The new rules for Belarusian citizens came into force on July 9.

Among the sanctions imposed on the regime are restrictions on access to EU capital markets, a ban on the sale, supply or export of equipment, technology or software that can be used to intercept internet communications in the country.

In an attempt to recover from the current 90% of foreign debt denominated in foreign currency, the country's central bank has imposed strict limits on the rules for foreign currency exchanges and transactions. The central bank has a mandate to confiscate foreign currency accounts of legal entities and transfer them into Belarusian rubles, and these restrictions were formulated in the context of ensuring economic security.

The Central Bank of Belarus (CBB) can now set the maximum amount of purchased currency and also regulate the period and number of permissible transfers and exchanges, as well as oblige legal entities and individuals to authorize such operations. The bank has the ability to restrict or even prohibit interaction with foreign accounts and require the mandatory sale of currency.

Economic turmoil causes a surge in cryptocurrency adoption

Due to the economic turmoil the country is going through, citizens have felt the heat of the EU's economic restrictions and are seeking refuge in Bitcoin and other cryptocurrencies.

These restrictions have proven difficult to circumvent, but because cryptocurrency is anonymous, citizens of Belarus are using cryptocurrency to make online purchases without the EU and government noticing.

The cryptocurrency situation in Belarus is not the worst or the best, as there is only one registered cryptocurrency exchange in the entire country. Despite the few cryptocurrency exchanges available to the nation, buying BTC and other coins like Dogecoin in Belarus is comparatively easy and quick thanks to the country's crypto-friendly policies. In this current situation happening in the country, it is still easier to use cryptocurrencies for cross-border transactions than fiat.

Crypto regulations in Belarus

After the formulation of Decree №8 in 2017 (which legalized concepts such as blockchain technology, mining, and cryptocurrencies), which focused on encouraging the growth and development of hi-tech, there has been a massive increase in interest in the IT industry in the Republic of Belarus.

According to Belarusian legislation, HTP residents have the right to legitimately operate a cryptoasset business, register crypto exchanges and exchanges, conduct Initial Coin Offerings, and also participate in cryptocurrency mining and trading.

Currently, bitcoin and cryptocurrency business in Belarus operates on the basis of the legal rules of High-Tech Park. However, there is a ban on paying for products or services with cryptocurrencies if the company is not considered an HTP resident. On the other hand, transactions with cryptoassets do not require VAT, and this helps to increase the position of cryptocurrency business in Belarus.

Efforts to revive the cryptoasset industry

The government is doing everything possible to see this burgeoning industry flourish. For example, the use of cryptoassets was legalized in March 2018, and various taxes on crypto-related activities such as mining and investments were exempted.

Also, during the meeting with high-level government officials on March 25, President Alexander Lukashenko mentioned cryptocurrencies and revealed that the existing regulation of the financial and banking industries should be changed to accommodate this new type of digital asset.

The president also instructed authorities to "clarify some regulatory norms and establish the necessary control" over the use of Bitcoin and other cryptocurrencies in Belarus. Using China's regulatory practices, the Belarusian government is working day and night to create a special government agency that will be responsible for controlling the development of the digital economy.

There are about 4 million Belarusians living abroad, and most of these people are turning to cryptocurrencies to send money to their families, relatives, and friends who are facing economic challenges within Belarus. Now, with the newly imposed restrictions, even more people will turn to digital currencies as an alternative method for cross-border transactions to avoid surveillance, unnecessary scrutiny, and red tape.