The Bank of Russia has unveiled proposals that would see the sale, mining, and circulation of cryptocurrencies banned as part of a radical move that finance chiefs say would protect the economy from the risks associated with digital currencies.
“The growing interest of Russian citizens, a significant amount of investments and high risks of transactions with cryptocurrencies create potential systemic threats. The status of the Russian ruble, which is not a reserve currency, does not allow for a soft approach in Russia and ignoring the increase in risks,” the document says.
Taking into account the above-mentioned, the Bank of Russia offers:
- Introduction of liability for violation of the prohibition on the use of cryptocurrencies
as a means of payment for goods, works, and services sold and purchased by legal entities and individuals who are residents of the Russian Federation.
- The introduction of a ban on the organization of the issue and (or) the issue, organization of circulation and exchange of cryptocurrencies (including crypto exchanges, crypto exchanges, P2P platforms) on the territory of the Russian Federation.
- Introduction at the legislative level of the prohibition for financial institutions on private investments in cryptocurrencies and related financial instruments of the ban on the use of the Russian financial intermediaries and financial market infrastructure for carrying out any operations with cryptocurrency (acquisition, implementation, payments and transfers, alienation cryptocurrency) and to facilitate the implementation such operations.
The bank insists that mechanisms should be developed in the country to identify transactions and persons carrying them out after the ban is imposed. It warns that mechanisms should be developed to block transactions aimed at buying or selling cryptocurrencies for fiat currency, as well as issues of licensing and registration of service providers in the field of virtual assets.
Taking into account the fact that in Russia it is common to buy and sell cryptocurrencies through crypto exchanges on the Internet using P2P services of Russian credit institutions when transferring the equivalent of fiat money, the Bank of Russia suggested identifying risk zones associated with the use of payments made for the purpose of acquiring cryptocurrencies.
To do this, the bank intends to ensure that foreign payment systems regularly receive information about payments made by Russian residents in order to purchase cryptocurrencies, including through payment cards. In addition, the Bank offers to organize an information exchange between the Federal Tax Service of Russia, the Bank of Russia, and Rosfinmonitoring to provide information about Russian residents possessing cryptocurrency.
The concerns grow as already nine countries in the world, including China, have banned cryptocurrency completely, and another 42 have instituted restrictions making it difficult to use it. Thus, the number of countries and jurisdictions that have banned crypto, either completely or implicitly, has more than doubled since 2018.
At the end of 2021, the Head of the Central Bank, Elvira Nabiullina, stressed that Russian authorities should not support the cryptocurrency market.
“We treat extremely negatively cryptocurrencies as private currencies that claim to be money. These cryptocurrencies are anonymous, no one is responsible for them, and, in our opinion, a responsible state should not encourage their distribution and displacement from payments,” the Head of the Central Bank emphasized.
However, the Director of the Financial Stability Department of the Russian Central Bank, Elizaveta Danilova, hurried to calm the country’s residents down by assuring that there are no legal restrictions on the ownership of cryptocurrencies, but restrictions on the use of Russian infrastructure, finam reports.
“We draw attention to the fact that we do not plan to introduce a ban on the possession of cryptocurrencies by citizens. It is possible to do this in foreign jurisdictions, although we still draw attention to the fact that cryptocurrencies carry significant risks that are also associated with the purchase of currency on foreign crypto exchanges: risks of fraud and difficulties in defending their rights. Therefore, we continue, like foreign regulators, to pay attention to these increased risks, but as the body responsible for financial stability in Russia, as the regulator of the financial sector in Russia, we consider it very important to ban the use of the Russian financial infrastructure for the purchase of cryptocurrencies,” Danilova said.
She expressed the hope that these measures will remove a significant part of the risks and “lead to the fact that there will be no such popularity of cryptocurrencies.”