Russia is moving towards regulating crypto.
Crypto regulation is one of the most discussed topics in Russia in the past few weeks.
On Tuesday, the Government of Russia published a statement that reads that digital assets will be regulated in the country “with strict obligations for all participants.”
Regulation is aimed to integrate the circulation of digital currencies into the financial system.
Moreover, investor protection will be given the utmost importance. That’s why proper disclaimers about the inherent risks will be provided.
Central Bank Proposes Ban
On January 20th, the Central Bank of the Russian Federation (CBF) called for a ban on crypto and associated activities because it can be used for illicit activities like money laundering and terror financing.
CBF also expressed its disapproval of crypto mining on the argument that it has a huge carbon footprint.
Finance Minister Advocates Crypto
A week later on January 26th, CBF and the Finance Ministry were at odds with each other. Ivan Chebeskov, Head of the Financial Policy Department at the Finance Ministry said that the ban on crypto would drag the country behind in the emerging technology.
Putin’s Call for Consensus
Russia’s President, Vladimir Putin urged both parties to build consensus.
He hailed Russia’s competitive advantage in crypto mining, surplus electricity and the skilled personnel available in the country.
A report citing anonymous sources from that day revealed that Putin was backing a Government proposal to tax and regulate the mining of cryptocurrencies. The proposal planned to restrict crypto mining in electricity surplus regions of the country, such as Irkutsk, Krasnoyarsk and Karelia.
Russia Might Accept Crypto as Currency
On Tuesday, it was reported by a local media outlet, Kommersant, that Russia is going to prepare a draft law by February 18 that will recognise crypto as an “analogue of currencies” rather than digital financial assets.
The translation also reads, “cryptocurrency in the Russian Federation, in fact, will be recognized as a close analogue of foreign currency (and not CFA).”
The aforementioned two statements are ambiguous.
It could mean that cryptocurrencies might get a currency status comparable to the Russian Ruble or they could be treated as Foreign Exchange.
Whatever be the case, acceptance of the currency aspect of crypto by a major economy like Russia is a positive sign for the industry.
Maybe the real meaning was lost in translation. It is expected to be clarified on February 18.
Owning cryptocurrency is not banned in Russia and operations with it are not prohibited – but only through the “organizer of the digital currency exchange system” (a bank with a universal license) or a P2P exchange licensed in the Russian Federation who comply with AML/CFT requirements.
As per the proposed legislation operations equivalent to more than 600 thousand rubles ($8000) must be declared. Transactions outside the legal sector for such amounts will become a criminal offence and will be prosecuted.
Last year, El Salvador became the first country and to date the only country to provide legal tender status to a cryptocurrency when it adopted Bitcoin. Since then, the world is wondering which will be the next country to do so. Crypto is regulated in other countries as well in some form. Most of these countries are tax-havens. If Russia legalizes crypto, it will be the first major economy to do so.
Recently a research report by the Russian Government claimed that Russians own over 12 million cryptocurrency accounts and about 2 trillion rubles ($26.7 billion) worth of crypto.
Russia is the 3rd largest contributor to the Bitcoin network at 11% according to the Cambridge Centre for Alternative Finance. It is the 9th largest country in terms of population, as per World Bank’s data. Further, it has a GDP of $1.4 trillion, ranking 11th in the world. So, the market has huge potential.
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