Violet Vallaya
Come September 1, 2024, Russia will implement a stringent prohibition on the widespread circulation of crypto assets, including popular cryptocurrencies like Bitcoin.
Only digital financial assets issued within Russian jurisdiction will remain permissible, marking a significant step in the government’s efforts to assert control over the crypto landscape amidst escalating geopolitical conflicts.
Why Russia Wants to Ban Crypto
Anatoly Aksakov, Chair of the State Duma Committee on the Financial Market, is leading an initiative to introduce stricter regulations on cryptocurrency within Russia. The proposed legislation aims to limit the influence of non-Russian crypto operations and solidify the primacy of the ruble as the nation’s official currency.
The rationale behind these restrictions stems from the growing use of cryptocurrencies as a quasi-currency within Russia, potentially undermining the ruble’s dominance. The legislation emphasizes the ruble’s sole role as the legal tender for the country.
However, the bill proposes exemptions for specific sectors. Crypto mining will continue to be permitted, as it generates significant tax revenue for Russia, exceeding $2.59 billion in foreign trade settlements. Additionally, the Central Bank’s experimental digital assets projects will be allowed to operate under a specialized legal framework.
To clarify the scope of the proposed restrictions, Anton Gorelkin, a member of the State Duma, has stated that a complete ban on cryptocurrency is not intended. Instead, the limitations will primarily target the creation of cryptocurrency exchanges and other platforms facilitating cryptocurrency transactions outside the designated experimental legal zone.
Russia’s Crypto History
Russia’s relationship with cryptocurrencies has been complex. Here are some key points from its history:
- Initial Skepticism (Pre-2020):
- Russia initially argued against cryptocurrencies, citing concerns about money laundering and financing terrorism.
- In October 2017, President Putin tasked the government and the Central Bank of Russia (CBR) with legally defining crypto-related concepts and developing regulatory frameworks for crypto mining and initial coin offerings (ICOs).
- Legal Status (2020):
- In 2020, Russia granted cryptocurrencies legal status but banned their use as payment.
- The Bank of Russia issued a consultation paper expressing concerns about crypto features, including high volatility, potential limitations on monetary policy sovereignty, and illegal activities like money laundering.
- Tension and Debate (2022):
- Tension arose between the Bank of Russia and the Ministry of Finance regarding future crypto regulation.
- While the Bank of Russia proposed strict measures, a Finance Ministry official advocated for regulation rather than prohibition.
- Ownership Statistics:
- As of 2023, approximately 10.1% (14.6 million) of Russians own cryptocurrencies.
- Ethereum (ETH) is the most popular crypto, followed closely by Bitcoin (BTC).
- Most crypto owners in Russia are young (18-34 years old), and interestingly, more women own cryptocurrencies than men.
As the September 1 ban looms, Russia grapples with the delicate balance between fostering financial innovation and exercising regulatory oversight. The global crypto community keenly observes how Russia navigates this intricate terrain, mindful of the broader implications for the evolving crypto landscape.
