The Finance Ministry says the new crypto law, which is less than a week away, could bring foreign investment. However, the Bank of Russia still has concerns about the legality of cryptocurrency use.
In less than a week, Russia will have finalized the new regulations that will govern the use of cryptocurrencies in the country. As per local media reports, the government will regulate cryptocurrencies as ‘an analog of currencies’ rather than a ‘financial asset,’ deviating from an earlier proposed law, which came into effect in January last year.
According to the reports, the government is keen on integrating cryptocurrencies within its financial system with a scheduled plan to release a draft law this week, on February 18. Nonetheless, the Bank of Russia holds a contrary stand, warning that the use of digital assets could flourish illegal activities.
Clear and transparent rules for the participation of citizens and businesses
Earlier this month, Russian Finance Minister Anton Siluanov said that legalizing cryptocurrencies would help eliminate grey market crypto trading and give the government the freedom to monitor the industry. He added that the government was thus working on an outline of regulating the market and permitting domestic trading through state-controlled financial institutions. In a statement to journalists on Monday, February 14, Alexey Moiseev said:
“We need to create clear and transparent rules for the participation of citizens and businesses in the financial instruments of the crypto market. Clear regulation excludes the possibility of a parallel financial system appearing.”
Regulation of “cryptocurrency providers” to protect investors
However, according to the Russian Union of Industrialists and Entrepreneurs (RSPP), Alexander Shokhin, there’s one catch in the draft bill. Shokhin opines that Russians won’t be able to use cryptocurrencies for payments. The draft envisions the regulation of “cryptocurrency providers” to protect investors. They would need to apply for licenses have adequate capital and liquidity while operating under complete client identification and anti-money-laundering laws. Shokhin stated:
“If we are talking about prohibitions, then that is rather about a ban on the use of cryptocurrency as a means of payment, while other aspects are subject to regulations.”
The proposed new law further states that only licensed providers will accept crypto transactions to avoid fines. Since cryptocurrencies will be treated as a foreign currency, licensed providers are allowed to accept transactions, but any token will have to be converted into rubles when it comes to day-to-day transactions.
Cryptocurrencies will be treated as a foreign currency
The Russian government’s decision to legalize crypto has a political and geopolitical angle. A legal crypto market would prove a gateway for Russia to avoid global sanctions. Furthermore, after the China crypto mining ban, Russia has emerged as the world’s third-largest crypto mining hub.
Russia’s central bank remains opposed to the use of crypto, stating that it bears the hallmark of a pyramid scheme. The Bank of Russia believes that crypto could be a tool for illegal financial transactions and thus recommends banning its use and mining activities. During a press conference last Friday, Bank of Russia Governor Elvira Nabiullina said:
“The approaches proposed by the government do not yet allow neutralizing the risks that we see, and at the same time, they create new threats. We see significant risks here, and I hope good sense prevails.”