The Russian economic ministry is calling for a controllable cryptocurrency market in the country instead of the outright ban proposed by the government.
Do Not Ban Cryptocurrency Transactions
The Russian Ministry of Economic Development sent a letter to the country’s parliament, criticizing a package of draft bills recently put forward by the lawmakers. If the bills are passed, then the country would have its first regulatory regime for digital assets and cryptocurrencies. However, they would also be banning any business that facilitates cryptocurrency transactions within the country.
Russian newspaper Kommersant reported, after obtaining the letter, that the ban would not stop people from buying cryptocurrencies as they can purchase it elsewhere. Hence, the current version of the proposed bill will not empower the government to protect its citizen’s rights in the crypto market. The bill would also drive away crypto-oriented businesses from Russia, further harming the economy.
The report suggested that the new rules should instead take a different approach and work towards creating a controllable cryptocurrency market in the country.
Several regulatory agencies around the world have been paying closer attention to the cryptocurrency industry and rolling out regulations that will help control the activities without stifling growth. The crypto sector, on its part, has been looking for ways to comply with the regulations put in place. Despite Russia being a significant cryptocurrency market and home to several blockchain developers, the country, led by its central bank, is opting for a very conservative approach.
However, the suggestions from the economic ministry could see Russia tone down its hostile approach and embrace innovations within the local cryptocurrency market.
Russian Crypto Legislation
The draft legislation was introduced in late May to supplement the previous bill on digital assets. According to the bill, activities that allow the issuance of and operation with cryptocurrencies are illegal if Russian servers or websites, registered by providers in the country, are used.
With this, the bill would be banning the purchase of cryptocurrencies with fiat currencies and accepting them as a means of payment. However, owning cryptocurrencies are legal if they are inherited, transferred because of bankruptcy proceedings, or seized because of a court decision.
A source in the cryptocurrency mining industry in Russia, who took part in the working group in drafting the bill, pointed out that the Bank of Russia does not understand how to control the cryptocurrency market, hence, the reason why it is proposing to ban it.
The source added that for several crypto businesses, the bills would not alter their activities. This is because, even at the moment, crypto exchanges and OTC services with Russian founders prefer to register in other jurisdiction rather than in the country. Also, most of the cryptocurrencies in the country are bought using cash.
Sarkis Darbinyan, an IT-focused attorney, working with a Moscow-based law firm, the Digital Rights Center, highlighted that if the proposed bill is passed as it is, then cryptocurrency in Russia will be moving from the grey zone into the darkness, pushing the country into the digital underground. Darbinyan added that Bitcoin would get the same status as marijuana. People can use it in a limited manner without the watchful eye of the state, but they cannot talk or write about it.
Darbinyan stated that under the draft law, cryptocurrency owners need to report their holdings for tax reasons, and the information will then be available to the law enforcement agencies. However, he believes that only a crazy person would keep the police posted about the current size of their cryptocurrency accounts.
Bill to Affect Miners Too
Although mining operations were not mentioned in the bill, it looks problematic for miners operating in the country. The industry source stated that they proposed to legalize crypto mining in 2019, but their suggestions were rejected as there are no strong miners in the country to help lobby the case.
To make matters worse, miners cannot instantly move their businesses to other countries as the cost of relocating a building full of mining machines is much harder and costlier than moving an office. For larger mining companies, they can register their entities in another country, allowing them to put the miners in a data center in Russia. In this way, the registered company is not issuing cryptocurrencies and, as such, is not breaking the law. However, small miners with less than $50,000 worth of mining equipment will be out of business, thanks to the proposed bill.