Russia to Recognize Crypto But With “Strict Obligations” For its 12m+ Investors
Russia will become the latest country to regulate and tax cryptocurrencies, according to a recent government announcement. The Russian Government and the country’s Central Bank have reportedly drafted legislation that would recognize crypto as a form of currency. However, there is a catch—the proposal includes “strict obligations for all participants.”
Russia to Regulate Cryptocurrencies
The Russian Government has decided on the future of digital assets inside the country, an official statement released on Tuesday claims. The statement adds that there will be an emphasis on protecting individual investors, but abstains from disclosing specific details. When translated to English, it reads:
“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.”
The legislation would announce licensing requirements for cryptocurrency exchanges, which will be required to have “financial airbags” in terms of liquidity and capital adequacy. They will also need to inform retail investors of the risks associated with the industry, and even divide investors into “qualified and unqualified” classes. The statement said:
“The implementation of the concept will ensure the creation of the necessary regulatory framework, will bring the digital currency industry out of the shadows and create the possibility of legal business activities.”
Detailing on the matter, local Russian media outlet Kommersant reported that the draft law will be prepared by February 18. It said that cryptocurrencies will be categorized as an “analogue of currencies, and not digital financial assets (DFA).”
The move comes weeks after Russian President Vladimir Putin asked the country’s finance ministry and Central Bank to reach a unanimous decision over crypto. Prior to that, the Bank of Russia asked for a blanket ban on the crypto market citing the volatile nature of the market and its usage in illicit activities, but the country’s Ministry of Finance opposed the decision.
Instead, Ivan Chebeskov, the head of the financial policy department of the Ministry, asked for a proper regulatory framework. “We need to regulate, not ban. Regulation is sufficient to protect our citizens,” Chebeskov said at the time.
A rough translation of an accompanying official draft document seemed to support Minister Chebeskov’s point of view. It argued that a ban is impossible and would instead push users to go underground.
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Concerns About Russia’s Upcoming Cryptocurrency Regulation Bill
The report by local media Kommersant reveals some potential concerns around upcoming regulations. For one, only licensed intermediaries or the banking system would be able to offer crypto-related services.
Moreover, transactions worth 600,000 rubles (around $8,000) or more would be required to be reported. Unreported transactions of this amount will “become a criminal offense” and will be subject to fines. Notably, the draft bill does not discuss details related to mining operations or the “transition period.”
Crypto firms who want to operate would need a full identification of customers based on banking rules, Anti Money Laundering (AML), and CFT requirements. Further, Rosfinmonitoring, Russia’s main body for financial intelligence, will monitor all transactions using blockchain “in the same way as transactions with non-cash rubles or foreign currency on bank accounts” are monitored.
Meanwhile, Russia’s Ministry of Finance estimates that there are over 12 million unique crypto wallets that cumulatively hold assets worth 2 trillion rubles (around $26.7 billion).
Potential $13 Billion in Tax Revenue for the Government
As per initial estimates, the Russian Government could collect up to $13 billion in tax revenue from the cryptocurrency industry. Russia is home to 12% of global crypto holdings.
It is possible that the government might pursue a multi-faceted tax policy—taxing both the cryptocurrency exchanges and the investors for trading cryptocurrency.
Are you optimistic about Russia’s upcoming crypto regulations? Let us know what you think in the comments below.