Do not repeat at home: The Central Bank proposed to ban the circulation of cryptocurrency in Russia

Kremlin today

The Central Bank of Russia has proposed a ban on the release, mining and circulation of cryptocurrency in the country. The text of the report describes the risks to the national currency associated with the spread of digital currencies. Due to the fact that the Russian ruble is not a reserve currency, the regulator considers it advisable not to adopt a “soft approach” but to introduce “additional measures”. The solution, in the opinion of the Bank of Russia, may be changes made to the legislative system of the state.

According to the report, the current scale of cryptocurrency turnover in Russia reaches five billion dollars per year. This could lead to financial instability in the electricity sector (“threat of energy supply to residential buildings, social infrastructure buildings and businesses”). Digital currency, according to the Central Bank, can be used to evade taxes, withdraw money abroad, or purchase goods on the black market. Moreover, cryptocurrency operations could prevent the Russian Federation from implementing its environmental program to reduce the carbon footprint.

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Restrictions proposed to introduce:

  1. Residents of the Russian Federation would be responsible for paying for goods and services using cryptocurrency.
  2. The state will enforce the ban on currency release by crypto-virges, crypto-exchangers, and P2P-platforms. It is proposed that mechanisms be developed to identify persons who deal in digital money and to block the sale of cryptocurrency. 
  3. Financial institutions would not be allowed to invest their own funds in financial cryptocurrency instruments. The ban is proposed to be imposed on “the use of Russian financial intermediaries and financial market infrastructure to carry out any transactions with cryptocurrency”.

The Public Consultation Report calls for dialogue with national and international regulatory organizations in order to collectively “harmonize approaches”. This would avoid “regulatory arbitration” in a context of different laws.

At the same time, the Bank of Russia is undertaking a number of measures to inform citizens about the risks associated with cryptocurrency, as well as about their difference from the digital currencies of central banks.