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Russia decided to regulate cryptocurrencies, instead of banning them, as recommended by its central bank officials who saw digital currencies as a risk to the nation’s financial stability. With this decision, the Russian government opted to give banks control over transaction mechanisms in the world of cryptocurrencies.
“The purpose of the regulation is to integrate the mechanism for the circulation of digital currencies into the financial system and ensure control over cash flows in the circuit of credit institutions” reads the Kremlin’s press release.
The Kremlin’s missive also clarifies that cryptocurrency brokers and platform will need to be licensed to operate and will be required to have a minimum amount of liquid assets to perform these activities.
The Russian government has also established a guideline to start regulating cryptocurrencies, entitled: “Concept for regulating mechanism for organizing the circulation of digital currencies,” where the regulatory framework for regulating cryptocurrencies is given.
In the official document on the legislation, the Russian government estimates that there are about 12 million cryptocurrency accounts in the country, in which about 2 trillion rubles or $26.7 billion in crypto assets circulate. According to the Bitcoin Electricity Consumption Index, made by the University of Cambridge, Russia is the third most intensive Bitcoin mining country in the world.
The decision goes against the central bank’s request to the government to outlaw all cryptocurrency activity, calling digital assets a threat to Russia’s financial stability.
Despite the recommendations of the Russian central bank, the Kremlin’s position is that “the complete absence of regulation of this industry, as well as the establishment of a ban, will lead to an increase in the share of the shadow economy, an increase in fraud cases and destabilization of the industry as a whole.”
Russia also aims to have more information on the activities being carried out with cryptocurrencies in its economy and will use a verification system to obtain information on the destinations of transactions.
All transactions in cryptocurrencies greater than 600,000 rubles (just over $8,000), will have to be reported to Russia’s Federal Tax Service, failure to report such transactions will be considered a crime under the legislation.
The proposal also suggests allowing banks to act as intermediaries between users and cryptocurrency exchanges. Crypto brokers will have to provide information on the identity of their users, as well as information on their transactions in order to verify that there is no trace of illicit activities. Finally, they will have to provide information on fiat money transactions and keep data on transactions made on their platforms for five years.
Cryptocurrency exchanges will have to register as legal entities and join an official registry of digital currency exchanges. One of the requirements of the legislation imposes that cryptocurrency traders must open a bank account with one of the authorized banks. According to Kommersant, a local Russian media outlet, the regulation against cryptocurrencies is similar to controls on foreign currencies such as the dollar.
Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica