Amidst the political tension in Europe, Russia’s government has announced a plan to regulate cryptocurrency.
Previously a stark adversary to cryptocurrency adoption, the Russian government did a complete one-eighty and introduced a set of principles to regulate the digital currency asset class. The report details plans to appoint the central bank as the head overseer of cryptocurrency regulation. This came as a surprise as Russia’s central bank recently called for a blanket ban on all cryptocurrency activity due to the threat of illegal activities, particularly fraud. With 12M active Russian cryptocurrency accounts, holding approximately $26.7B, the central bank argued that a concrete regulatory framework was necessary to protect the national economy.
Irrespective of the central bank’s concerns, the Russian government moved to legitimise the digital asset class by permitting cryptocurrency purchases in Russia, albeit with strings attached. Russian citizens will be permitted to trade cryptocurrency but only through locally registered and licenced companies. These exchanges require full verification from the central bank with public disclosure of transaction history made available to government agencies if requested. Additionally, any transaction greater than $7,700 must be reported by the exchange to the Federal Taxation Service for investigation.
An underlying proposition in the report suggests utilising private banks as intermediaries between users and cryptocurrency exchanges. This would allow user verification, screening for illegal purposes, and create a paper trail of movement of fiat currency. This would then allow the banks to easily pass user information to government agencies.
Russia is also currently developing a transparent blockchain tracking tool to scrub blockchain data for illegal activity. This means that local cryptocurrency exchanges must be lawfully registered with Russia’s Register of Digital-Currency Exchange Operators. Similarly, any entity wishing to provide cryptocurrency services must be registered in Russia and have a permanent local office.
These principles saw overwhelming support from the central bank and several governmental bodies. These laws are set to come into effect in late 2022 or early 2023.