The last paragraph is the heart of the article.

"The law also creates the basis for a new Russian national payment system that hopes to compete with the two U.S. companies."

This seems to achieve several goals at once:

1) Highlight that foreign payment processors are unreliable for Russians.

2) Either edge them out of the market or get a crap-ton of 'insurance' money. I wonder if the companies can even pay this money, according to U.S. authorities?

3) Keep the profit from becoming the de facto payment standard for Russians.

If the new payment companies are making money for Putin's government I would not bet against them, using bitcoins or anything else.

It's a funny turn of events. I know plenty of companies that were sunk by arbitrary fines from Visa and Mastercard in the past (whole IPSPs tanked because of ridiculous and ill motivated fines).

Sure sucks to be on the receiving side of something like this. The only thing this will do as a result is to slightly increase Visa and Mastercard fees.

One way VISA/MC could strike against this law is by simply cutting off all Russian cc's. That would hurt them as well but they could simply stop doing business there for a week or so. I think that Putin would very quickly recant once it becomes evident how much of the Russian economy is now dependent on such instruments.

The new Russian owned payment system is dead in the water from a non-Russian perspective, the only reason VISA and MC are so popular in Russia is because people do not trust local alternatives, not because they don't have other options.

With Russia and Putin, you never really know: Is this move extraordinarily stupid or extraordinarily brilliant? Russia is an authoritarian state, that on the one hand isn't doing terribly bad economically, but on the other hand notoriously corrupt and not getting a foot in the door innovation-wise.

Of course, the "security deposit" isn't for security against these companies failing. The deposit will help with the squeeze Russia is feeling, and on the other hand this whole law would allow the Russian one-party government (which doesn't know any kind of division of power, by the way) to extort Visa and MasterCard.

I don't know if building a state-controlled credit card processor is worth it to risk being cut off from Visa and MasterCard. You would certainly expect foreign businesses to be extremely careful or suspicious toward such an entity...

That's actually a very reasonable response to what Visa/MC did.

I guess that Visa will now quietly back away from the sanctions and in return Russia will either extend the deadline, reduce the security deposit or allow them to participate in development of the national payment system. Probably latter.

Economic sanctions are counterproductive. Severing economic ties makes war more likely, not less.

Knowing how corrupt the Russian government is I'm certain this new electronic payment system will be... As Borat would say, a great success...

Putin could kick it up a notch, nationalize the companies assets in Russia and forgive all dept held by the companies in Russia. What kind of a hit would this cause the shareholders of these companies I wonder?

Now sure, international lenders would be more wary of Russia after that, but when you have the resources Russia does maybe credit is less important? Besides, if lenders are going to be used to destroy your economy why not behave proactively?

I doubt it will come to this level... at least immediately, but some people think only the west has the capability to cause financial chaos and pain. I don't think this is the case. This is why I believe we should be more cautious about hostility, financial or otherwise.

Interesting. I wonder whether they'll pay the protection money or choose to leave? I wonder if this will drive Bitcoin adoption in Russia?

Note that the US government is no stranger to strong-arming payment processors into refusing payment to businesses it deems undesirable, not always on a legal basis. For example, donations to wikileaks. The Russian position is that Putin insists on being the one strong-arming opponents. This is not an improvement.

(I wonder if this thread is going to be "yay, someone breaking the payments cartel and going after the banks" or "boo, Putin"?)

One more reason to leave this stupid country.

Oh, the US government will just retaliate with sanctions against Russian companies.

Max Keiser is going to blow an artery with excitement.

Why so many Visa and MasterCard ass kissing here? It doesn't matter what you guys think of Russia and Putin. Visa and Mastercard ain't innocent here either. They fudged their rate and have been sued multiple time since their existence.

Personally, I don't think any country should rely on Visa or Mastercard since like the article said any countries that face U.S. sanction is basically fucked. This is equivalent of using closed source software to run your govrt.

Russia or any countries for that matter have the rights and should develop their own domestic payment transaction.

Visa already announced that it stays. After all this is ugly practice that Visa chosen to block certain banks for imaginary reasons and customers of that bank suddenly can't use their cards anymore.