The ban on cryptocurrency in Russia: how realistic it is and what to prepare for

The ban on cryptocurrency in Russia: how realistic it is and what to prepare for

The Bank of Russia proposed to ban the use of Russian financial infrastructure to work with digital assets. We understand how this will affect crypto investors

On Thursday, January 20, the Bank of Russia released a report for public discussion, in which it proposed to impose a ban on the issue, circulation and exchange of cryptocurrencies, as well as on the organization of these operations in Russia. The regulator also considers it necessary to ban the mining of digital assets and begin to monitor the investments of Russians in cryptocurrency on foreign trading platforms.

Before the publication of the report of the Central Bank, Bloomberg, citing two informed sources, reported that the head of the Bank of Russia Elvira Nabiullina agreed to support a complete ban on cryptocurrencies in the country under the influence of the Federal Security Service. According to sources, the FSB insists on a complete ban on cryptocurrencies in Russia in order to exclude the possibility of accepting donations by undesirable organizations and media that have been included in the register of foreign agents. The Central Bank denied this statement and reported that the regulator initially took a skeptical position regarding cryptocurrencies.

Experts of RBC-Crypto explained what prospects cryptocurrencies have in the Russian market and what crypto investors should do.

The position of the Central Bank has been known for a long time

In Russia, for several years, the possibility of a potential ban or permission of cryptocurrencies has been discussed, recalled Maria Stankevich, development director of the CRYPTO exchange EXMO. According to her, there are regularly different opinions about whether a ban on cryptocurrencies is possible in Russia or not.

"The position of Elvira Nabiullina on this issue has long been known and understandable to us, since for the Central Bank cryptocurrency is just a headache and nothing else," the expert says.

Earlier, the head of the Central Bank Elvira Nabiullina said that the regulator is extremely negative about private cryptocurrencies that claim to be money. According to her, the problem is that digital currencies are anonymous and no one is responsible for them. The head of the Bank of Russia has repeatedly criticized cryptocurrencies, calling them a "money surrogate", and also recommended Russians not to invest in digital assets.

"The vision of the Central Bank is the vision of the Central Bank, you need to understand that this is only one side of the big state machine," the expert says.

Despite the regulator's hostile attitude to cryptocurrencies, Stankevich expressed confidence that Russia will not follow the path of China and a complete ban on cryptocurrencies. As an argument, she recalled that digital assets have already been recognized as property and are subject to taxation, according to the law "On DFA", which came into force in early 2021.

"Now a complete rejection of them will look at least illogical," Stankevich said.

The possibilities of the Central Bank are limited

Now under the control of the Bank of Russia is the chain of, says Eduard Davydov, a partner at the international law firm NOA Circle. According to him, the regulator does not have the opportunity to limit the turnover of cryptocurrency in Russia.

"The acquisition of new tokens or coins in the classic and most popular way, through debiting money from the card, will become impossible or difficult," the expert explained.

Davydov recalled that earlier the issue of blocking cryptocurrency exchangers by MCC codes, which payment systems assign to each organization, had already been raised. Thus, banks can determine which services include certain payments, the expert noted. He also added that it will be more difficult to limit p2p transactions (between individuals), since it is difficult to determine the nature of such transfers.

"The bank does not know whether you returned the loan to your friend or transferred funds to pay for cryptocurrency. But I believe that the Central Bank will oblige banks to collect information on specific individuals noticed in involvement in the turnover of cryptocurrency, and make them a "black list", subsequently restricting access to financial services, "Davydov suggested.

On January 19, it became known that the Bank of Russia began to study the operations of Russian banks related to crypto exchangers. At the end of last year, the Central Bank sent requests to banks to work with crypto exchangers in terms of making payments between citizens.

The process of a complete ban on cryptocurrency transactions is not a quick procedure, said Dmitry Galushko, CEO of the law firm OrderCom. The regulator began work on this last year, so in 2022 there is a high probability of introducing restrictions on cryptocurrencies, he believes. Galushko also recalled the initiative of the Central Bank to issue a digital ruble. In his opinion, the ban on cryptocurrencies and the issue of a national digital currency are interrelated things.

The digital ruble is an additional form of the Russian national currency,which will be issued by the Bank of Russia. It combines the properties of cash and non-cash rubles. In 2022, the regulator plans to conduct the first stage of testing the digital ruble, within which credit institutions and C2C operations (Consumer-to-Consumer, consumer-to-consumer interaction) will be connected.

What crypto investors should do

The initiatives of the Central Bank on cryptocurrency are taking a legislative form, but this process can take from three months to a year, Eduard Davydov believes. He also pointed out that judging by the statement of the Central Bank, the regulator will not limit the ability of Russians to buy cryptocurrency on foreign trading platforms.

"Things are more complicated for miners, it seems that we are on the verge of a new migration, following the one that occurred in China," Davydov added.

For short-term investors who may need funds in the coming months, Davydov recommended considering the option of selling crypto assets and withdrawing funds from crypto exchanges. Long-term investors make no sense to worry about the statement of the Central Bank, the expert believes. He added that such investors will always have the opportunity to travel outside of Russia and sell their assets on the territory of other states without violating Russian law.

Cryptocurrencies were invented just in order to circumvent various restrictions and prohibitions, recalled the executive director of the crypto company InDeFi Smart Bank Sergey Mendeleev. In his opinion, no restrictions are able to destroy the cryptocurrency market, but are able to free it from new and inexperienced participants who entered the industry last year. In this regard, Mendeleev is sure that there are no prerequisites for panic at the moment.


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