The Bank of Russia will ban the issuance and circulation of cryptocurrencies?

After years of uncertainty about its cryptocurrency regulations, Russia continued to be confused about the proposed cryptocurrency law when the country’s central bank made another statement on the issue. Specifically, a new version of Bank of Russia’s delayed digital asset bill will include a ban on the issuance and sale of cryptocurrencies.

The country’s primary but still unfinalized cryptocurrency legislation

According to a legal executive at the Bank of Russia, the country’s primary but still unfinalized cryptocurrency legislation – a bill “On Digital Financial Assets” – will ban the issuance and circulation of cryptocurrencies.

Alexey Guznov, head of the legal department at Russia’s central bank, said:

“We believe there are big risks of legalizing the operations with the cryptocurrencies, from the standpoint of financial stability, money-laundering prevention, and consumer protection.”

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Alexey Guznov, head of the legal department at Russia’s central bank
Although the original bill on digital financial assets, provided that cryptocurrency trading would be allowed in Russia, the revised document appears to prohibit almost everything about cryptocurrencies except holding.

Guznov said the upcoming law will explicitly prohibit the issuance and circulation of cryptocurrencies and will impose penalties for violating the law.

Guznov argues:

“In terms of the functioning of the financial system and consumer protection system, legalization of the issuance and facilitating the circulation of cryptocurrencies is an unjustified risk. As such, the bill explicitly prohibits emission and organization of cryptocurrency circulation, introducing legal liability for violating these rules.”

Bank of Russia can hardly regulate Bitcoin transactions

In addition to claiming that the cryptocurrency bill would ban Russian financial institutions from issuing digital assets, Guznov provided little clarity about the upcoming bill. When asked whether the Russian Bank wants to ban residents from converting cryptocurrencies into local fiat currency, the Russian ruble, or foreign currency, Guznov did not give a direct answer.

Instead, Guznov reiterated his position as follows:

“The central bank opposes institutions issuing cryptocurrencies, adding that the bank would be unable to impose certain limits on transactions in Bitcoin. If a person who owns, for example, Bitcoins, completes a transaction in a jurisdiction that does not prohibit this, we are dramatically to be able to regulate that.”

He adds:

“The central bank contributed to a second draft of the bill in the fall of 2019, clarifying the requirements for the issuers of such tokens, Guznov said. In particular, the issuer should report capital of no less than $ 660,000 (5 million Russian rubles) and be able to provide access to the ledger to law enforcement if needed.”

Russian cryptocurrency laws were first introduced in January 2018

The latest remarks on Russia’s upcoming cryptocurrency regulation come after years of uncertainty as well as any delays in providing any regulatory clarity. First introduced in January 2018, President Vladimir Putin ordered the passage of the Digital Asset Bill twice, but the law has not been proven to date.

While the Russian Ministry of Finance is trying to legalize cryptocurrencies in the country, the central bank is struggling to ban Russians from using cryptocurrencies legally.

In February 2020, the Bank of Russia issued a set of rules for suspicious transactions, classifying any cryptocurrency-related transactions as potential money laundering risks.

While banning local entities from issuing their digital assets, the central bank has considered issuing its digital currency. In December 2019, the head of the Elvira Nabiullina bank said that the organization was exploring the possibility of issuing digital rubles.

The Russian bank said it was running the first pilot tokenization project by mining and smelting company Nornickel, which is planning to tokenize batches of palladium, cobalt, and copper and sell metal-backed stablecoins. The company is now testing its marketplace for the tokens, registered in Switzerland. Stablecoins like these, Guznov said, are within the framework of the digital assets bill.

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